Could Your Business Use Merchant Cash Advances?

Could Your Business Use Merchant Cash Advances?

Many small businesses today flourish because of daily credit card sales. But even companies that are making strong sales sometimes run into problems that cause their cash flow to dry up unexpectedly. When financing becomes necessary in order to keep your business operating, where do you turn?

If your attempts to secure a business loan from traditional banks have failed, what other option do you have?

Maybe you could use a merchant cash advance.

What Is a Merchant Cash Advance?

Merchant cash advances are not technically qualified as loans. You get a specified amount of cash upfront in exchange for either a fixed daily or weekly fee or for a percentage of credit card and debit card sales until the balance owed is paid off. And your terms will also lay out a timeframe in which the money needs to be repaid.

The total amount you’ll have to repay is based on the factor rate multiplied by the amount borrowed. So for example, if you borrowed $60,000 with a factor rate of 1.4, you would end up paying back $84,000 (1.4 x $60,000).

How Can a Merchant Cash Advance Help Your Business?

Cash flow is like the blood running through the veins of your business. And if that flow weakens, it can cause all kinds of problems for your company. For any business that needs a boost in cash flow, merchant cash advances can be a big help.

For some businesses, paying back the advance with micropayments on a daily or weekly basis might be more manageable than making larger monthly payments.

As long as your daily sales are fairly consistent, keeping up with those payments shouldn’t be too much of a problem.

Do Merchant Cash Advances Have Risks?

Just as with any other type of financing product or service, cash advances have risks and drawbacks too.

While the advance may not be calculated in terms of APR and interest per se, the total cost can be higher than traditional loans. So this is not a decision to be made lightly.

Some financial experts even advise that merchant cash advances should only be used as a last resort, when other attempts to secure more affordable financing options have failed. The truth is, merchant cash advances are used by businesses of all sizes to supplement working capital with more flexibility than traditional debt-based loans.

So if your business’ cash flow has taken a big drop – yet you still have a decent amount of credit card and debit card sales coming in daily – contact Diamond Capital Financing to see if a merchant cash advance would be a good option for you.