How a Small Business Cash Advance Makes a Business Flourish
It is imminent for budding entrepreneurs to face a financial crunch in several instances. However, it is increasingly important for them to come out of the turmoil as early as possible. If they are not able to do so, they are likely to face several issues which can sabotage the integrity of their business. In such a situation, a small business cash advance can help them overcome the financial problem in a relatively short period of time. Most entrepreneurs require an advance for a short passage of time since they would not need much time to make the payback. Mostly, the amount is required in an hour, a day or maximum three to four days. On the contrary, certain businesses also need a long-term cash loan to manage their business. All this sums up to a unanimous question that who will actually provide the small business cash advance?
In most cases, the most difficult part to own and run a business is getting quick access to cash that will enable you to maintain and sustain growth. There has been a misconception about businesses who have been fairly new in the market struggle to secure a working capital.
However, this is not the case!
Small businesses and startups, who have been in business for six months or more, are eligible for a business cash advance. This source of funds can help them increase their working capital as well as maintain a healthy cash flow. In addition to this, businesses who are on a budget can efficiently meet their day to day needs with an extra infusion of cash. Whether you want to finance your short-term cash needs or facilitate long-term organizational objectives, a small business cash advance is a quicker and safer method to get access to fast cash.
A majority of people remain apprehensive about business cash advance due to preconceived notion that the advance is a new way to con companies. What these businesses fail to realize is that a small business cash advance is totally different when compared to conventional loan options.
There is a reason why business cash advances have gained immense popularity in recent years. Initially, people used to opt for business loans, but it started to become a liability as businesses failed to repay the fixed amount on a predetermined schedule. In addition to this, there is always a risk of defaulting which may result in a bad credit score. When we talk about business cash advances, not only the approval process is easier, but the repayment terms are feasible as well. The funded amount is repaid on the basis of future credit and debit sales. Getting access to funds has become easier where you can repay the amount easily as well as maintain a steady cash flow.
What is a Small Business Cash Advance?
One of the most used alternative lending options is a small business cash advance – an alternative unsecured cash advance available to fulfill financial needs of those businesses who have been denied a conventional loan. It doesn’t matter if you have a bad credit history or are a new entry in the industry. It is believed that businesses are unable to get access to funds if they do not have a perfect credit score. With alternative lending options, the lenders make sure that such businesses can secure the working capital they need to grow and expand their business.
There are different types of small business cash advance for you to choose depending on individual business needs. The most common variety of business cash advance is known as merchant cash advance or MCA. What makes MCA a feasible option for new businesses is that the cash advance is repaid through the merchant processor of the business – thus, there is no need to get bank account details. Depending on the volume of credit card sales, the repayment terms are decided between you and the lender. This is the reason why this option is different keeping in mind the type and nature of the business. In addition to this, it is not considered as a loan because there are no fixed repayment terms decided mutually.
What is a Merchant Cash Advance?
A lump sum cash payment given to a business in the form of cash advance is known as a Merchant Cash Advance. This type of a small business cash advance is provided in return for a fixed percentage of credit card sales or receipts on a predetermined schedule i.e. daily, weekly, or monthly. MCAs are an ideal option for those businesses who are looking for short-term financing options. These are supposedly paid off within two years or so. Similar to business cash advance, MCA is not considered a loan as well. In simpler words, the amount provided is the sale of company’s future credit sales.
Typically, merchant cash advances are kept as a last resort due to the higher cost of capital. However, they are flexible when it comes to getting approved for funds and repayment terms.
MCA lenders usually approve applications of those businesses who have been in business for over six months and can easily generate $10,000 in sales on a monthly basis.
If you are a business looking for a small business cash advance, this is what you can cover with the funds received:
- Short-Term Financing
- Working Capital
- Cash Flow
Businesses looking for a quick funding option can leverage MCAs where MCA lenders approve and provide them with the working capital in as little as two to three days. As long as your business accepts credit card payments, you are eligible to apply for a merchant cash advance.
Typically, MCA lenders target a dollar amount that businesses generate on a monthly basis before they approve the applications. The targeted amount varies by lenders as well as the business depending on their need. The only thing MCA lenders want to ensure is that businesses can easily repay the entire amount within a two years’ period.
Reasons why a MCA is the best type of small business cash advance
There are several reasons why you need access to fast cash advance for your business. It varies from starting a new business opportunity to purchasing new machines or equipment. Apart from this, if your business is in debt, you can leverage merchant cash advance to make payments of dues. Whereas, the additional infusion of cash can also help you cover unexpected delay in funds which were expected from other resources. In all such situations, it is important that the business has sufficient funds to efficiently take care of essential business needs.
However, your business must be eligible in order to avail a cash advance. In the past few years, small business cash advance has proved to be a handy finance option in the time of need.
You are eligible for cash advance without any employment or salary proof. In addition, cash advance does not need any collateral or guarantee as the amount is repaid through the business’ merchant processor. However, if your business does not accept Master or Visa card, you do not qualify for a small business cash advance.
Moreover, there are many advantages for business who seek to leverage merchant cash advance as the source for their working capital. The biggest advance to a business is that they do not have to be involved in long and stringent processes to get approval. The processing time is less when compared to conventional loan options. Apart from this, MCA lenders do not require any collateral as your merchant processor will be automatically repaying the funded amount on the basis of daily, weekly, or monthly credit card receipts. Your application is approved within hours and it does not involve lots of paperwork.
How Does Small Business Cash Advance Work?
Applying for a small business cash advance is simpler in days while getting approved for a conventional loan is impossible unless you have a perfect credit score. All you have to do is visit the website of one of the MCA lenders, fill an online application form, and submit with all essential details. The lender will evaluate your profile and allocate funds depending on your needs and sales receipts. The cash advance is transferred to your bank account within hours and days.
Hence in a nutshell, when you choose small business cash advance over other loan options, you are not personally liable to repay the funded amount. Merchant cash advances have become a popular choice for businesses and startups who have recently entered the market. Considering the process, benefits, and flexibility this lending option offers, people are willing to choose it over traditional bank loans where you have to maintain a perfect credit score to fulfill financial needs.
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