Merchant Cash Advances: 5 Advantages for Businesses

Merchant Cash Advances: 5 Advantages for Businesses

Often businesses that require additional financing are not eligible for traditional loans. Under these circumstances, one available option is a merchant cash advance, which involves obtaining an upfront amount of cash based on future sales. Here are some of the advantages of this form of financing.

Qualify Without a High Credit Score

Unlike other types of funding such as loans, your qualification for a merchant cash advance is not primarily based on your credit score. Instead, the main requirement for approval is that your business gets a significant amount of its income from debit and credit card sales.

Obtain Funds Quickly

If your company is urgently in need of capital to improve its cash flow, a merchant cash advance may be the answer for you. Once you apply, you can typically receive the financing you need in less than a week.

Have No Restrictions on Usage

Some loan programs, such as those from the U.S. Small Business Administration, have strict stipulations on how the borrowed money is to be spent. However, when you obtain a merchant cash advance, you can spend the money for whatever your business needs most, whether it is inventory, equipment, personnel, debt repayment, marketing, or expansion.

Protect Your Assets

When you receive a traditional loan, you often have to put up personal or company assets as collateral. With a merchant cash advance, though, collateral is not required, because you are not really obtaining a loan, but rather an advance on future sales.

Make Payments Based on Sales

Loan payments are fixed sums that remain constant regardless of the performance of your business. In contrast, payments for merchant cash advances comprise a portion of your sales. If your company encounters a slack sales period, your payment amounts are smaller, but if business is booming, you pay more.

For more advice on using merchant cash advances to finance businesses, get in touch with Diamond Capital.