Introduction
A merchant cash advance is a type of funding that allows businesses to borrow money against their future sales. The funding is paid back through a percentage of daily credit card sales. Merchant cash advances are a popular form of financing for small businesses because they are easy to qualify for and have flexible repayment terms!
How to determine your business's working capital needs
If you are considering a merchant cash advance for your business, it is important to understand how they work and what the terms are. Keep reading to learn everything you need to know about merchant cash advances!
How it Works
A merchant cash advance provider will offer a lump sum of cash to a business in exchange for a percentage of their future credit card sales. The provider will calculate the amount of the advance based on the business's credit card sales history and projected sales. The repayment process is different from traditional loans in that the business pays back the advance through a percentage of their daily credit card sales. This percentage, known as the "holdback," is typically between 10% and 20% of daily sales. The repayment period may range from a few weeks to several months, depending on the agreement between the business and the underwriter.
Qualification Requirements
Merchant cash advances are designed to be more accessible than traditional business loans, which means that the qualification requirements are generally less strict. Providers will typically look at the business's credit card sales history and revenue, as well as the length of time the business has been open, to determine eligibility. The business may also need to provide documentation such as bank statements and tax returns to confirm their revenue and financial history.
Benefits
Merchant cash advances offer several benefits to small businesses, including: - Easy qualification: Merchants with poor credit or little collateral may still be eligible for funding. - Flexible repayment: The repayment structure is designed to be flexible and match the needs of the business. - Fast funding: The application process is typically quick, and funding can be available in a matter of days. - No collateral: Merchant cash advances don't require collateral, which means the business doesn't need to put up assets as security.
Comments