Does your business operate more on cash instead of credit or debit sales? A small business merchant cash advance loan might be just what you need to keep an upfront sum of cash for liquid transactions.
A small business merchant cash advance loan (also known as a business cash advance, merchant loan, merchant financing, or merchant funding) is not a traditional loan —rather it’s a secured financing product that gives you a lump sum of money upfront in exchange for a portion of your future sales. Merchant cash advances are usually repaid by taking a fixed percentage of future credit/debit card sales (known as a “holdback amount”) until the full amount of the cash advance is repaid. Because merchant cash advances are not quite loans, they are not held to the same laws and regulations as traditional lenders, so interest rates and factor rates can be very high.
The amount taken from your sales to pay back the merchant cash advance is a percentage, so the more money you make in credit/debit card sales, the faster your business cash advance will be paid back. Conversely, if sales suffer an unexpected hit, the payment will be lower. Merchant cash advance loans are typically approved quickly, and funds can be accessed in a matter of days.
To apply for merchant financing, you will have to prove your ability to pay back the business cash advance. You will need to produce documentation such as bank statements and tax documents. You will also likely be required to provide additional documentation specific to your credit/debit card processing and sales. Then, your merchant cash advance direct lender can evaluate your loan worthiness.
Merchant cash advance loans may seem like an attractive offer for small businesses that need cash quickly, and may not be able to qualify for a traditional loan. However, due to the lack of regulation, it’s very important that you consider whether taking out a loan from a merchant cash advance broker makes sense for your business.
StreetShares provides the best options for getting the cash you need when you need it most through our collateral-free lending options.
Learn more about other simple collateral-backed funding solutions that enable small and medium-size companies to secure funding quickly and easily.
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