The economy is in an unstable state right now. There are days when the market is in good condition, and there are also times when it isn’t. Thus, entrepreneurs should have a backup source of funds when the industry is not in a good state.
Most business owners will choose the traditional business funding. Since these establishments are already an institution, they feel much safer and more secure. However, they need to wait for weeks to months before they get the money.
But there are business people, who are willing to make changes. They switch routes and try a new alternative funding. This financial backing that this article is talking about is a merchant cash advance.
Since it started, more and more people are switching to this type of business aid. Apart from quick process and transactions, there are several benefits that you will surely enjoy from them. No wonder why many finance companies are now offering a merchant cash advance service.
However, many people are still hesitant to get this assistance. They feel like it won’t give the security that they need. Moreover, they think that getting a business cash advance is harder than acquiring bank loans. Let this post change the way you think!
In this article, you will learn some of the benefits and misconceptions of this service. You will also learn the steps you need to take when getting a merchant cash advance. But before we discuss these topics, it’s crucial that you have a little background in this type of business funding.
Things You Need to Know About a Merchant Cash Advance
A merchant cash advance is a funding resort to businesses that need capital access for operation, expansion, and sudden expenses. Many people think that it’s just another form of a loan. The truth is, it is not. Loans don’t let you buy anything. They just give the money to you once they’ve approved your application.
Merchant cash advances let you get cash in advance. You buy your future sales from the finance agency. Once approved, the provider gives you a lump sum of money and deposits it into your account. At that moment, you can start paying for your merchant loans.
One of the good things about merchant advances is its versatility. Yes, it takes a portion of your daily profit. However, they don’t get the exact amount every day. It depends on the amount you sold for that day. So if you’ve got higher sales yesterday, the company would take higher payments. Likewise, if you made lower profits today, the agency would get lower charges.
Another unique thing about this type of loan is the way they make their decisions. Traditional business loans check the applicant’s credit score. Hence, if you have a low credit rating, you’re less likely to get their approval.
Business cash advance companies don’t base their decision on the applicant’s credit score. Since it’s a cash advance for businesses, they base their decision on the revenues and the age of the company. Thus, this type of funding is ideal for those who have no or low credit scores.
Misconceptions About a Merchant Cash Advance
Though the merchant cash advance industry has been around for 18 years, many are still afraid to get their services. It’s because of the misconceptions that leave a mark in every person’s mind. But as we often say, misconceptions are false accusations. People only say these beliefs so they can stick with the traditional funding.
To help you understand that these are just false allegations; we will explain the common myths about this service.
First, many people believe that it’s just another form of a loan. So why should they get it? First of all, MCA is not a loan. As the name suggests, it is a cash advance for merchants. Unlike loans, MCA lets you buy your future sales from the provider. To pay for the product; you need to install their credit/debit card processor. The equipment gets a portion of your daily profits, until the last day of payment.
Lastly, they think that cash advance businesses are loan sharks. Well, you can’t blame them why they think that way. These companies use a factory system. In this method, the firm multiplies your borrowed money from their additional fee.
For example, you lent $70,000 from the business finance firm. The extra charge is 1.25. If you multiply these digits, the answer is 87,500. Hence, you need to give them $87,500 in exchange for the purchase.
It may seem a big price because of the amount, but it’s not. The reason is they don’t have interest rates. Interest rates are the reason that pushes borrower to file for bankruptcy. If they fail to pay their debts on time, the rate will increase until you repay them.
Benefits of Getting a Merchant Cash Advance
Now you know the common misconceptions about merchant cash advances; it’s time to discuss why you should get it. There are many reasons why you should get your MCAs as alternative funding. For one, it doesn’t need collateral. Generally speaking, banks ask for a pledge if the applicant fails to pay the loan on time. If you miss the deadline, the company will foreclose your home, leaving you nothing. On top of that, it will affect your credit rating. Hence, the next time you want to get a loan, it will be difficult to get their approval.
With MCA, you can avoid this scenario. Companies that provide advanced money for businesses don’t ask for collateral. Hence, if you still have a remaining balance, and you missed the deadline, you still have a place to live.
Furthermore, it doesn’t affect your credit rating. MCAs focus on the business deals. Hence, they keep their hands off your credit records. Therefore, you can concentrate on the company’s performance to improve sales.
The collection and application process is another huge advantage. Getting a bank loan is hard. You need to do a lot of paperwork. Apart from that, they need to analyze your credit history, do a background check, etc. The worst part is, there’s no guarantee if they will approve your application. If they do, you need to wait for days before they deposit the money.
However, if you choose to get the MCA, you can avoid this situation. When applying for this cash, you only need to do a little paperwork. Furthermore, you only need to wait for one to two days before they approve your request. Then three days to deposit the money. All in all, it only takes a week to finish the entire process. That is much shorter than a business loan, which takes months to complete the procedure.
Last is the flexi-rate. As mentioned earlier, the cost is one of the primary misconceptions of MCAs. They think that this assistance is too expensive. The truth is, MCA offers a flexible payment. They base what they can get from your firm on your revenues. That way, you can still have enough money for your business.
However, you can only get these benefits if you choose top merchant cash advance services. Thus, make sure you read some reviews of merchant cash advance services before applying for a loan.
6 Steps for Applying a Merchant Cash Advance
Though this isn’t a loan, the process of getting MCAs and bank credits are quite similar. However, it’s not as complicated as conventional loans. As mentioned earlier, it only takes a week to finish the whole process. Below are some of the steps you must take when getting a merchant cash advance.
1 – Application for the funds.
Typically, you need to answer one to two-page of an application form. You also need to provide government IDs, such as business tax and social security IDs.
2 – Provide affidavits.
Apart from government IDs, you need to give them documents, such as bank statements, lease copy of the store, etc. The purpose of these papers is to prove that you are eligible to get the funds.
3 – Get their approval.
When you’ve submitted all the necessary documents, all you need to do is wait. However, you don’t need to wait that long. It only takes 24 hours to get their answer.
4 – Put up their credit card machine.
It is the trickiest part in getting the cash for entrepreneurs. The company will ask you to use their processor instead of the ones you have. This equipment is where they get their share. Once you swipe the card into the machine, they will automatically get a portion of your sales.
However, don’t worry, you don’t need to use it permanently. Once you’ve paid your debts, you can use your old system again.
5 – Settle the details.
Here’s an example to understand this step more.
Let’s say you borrowed $10,000. Once approved, you need to pay back $13,000. To finish the deal; the company will get 15% from your sales every day until you reach $13,000.
6 – Get the funds.
Once approved, the merchant finance company will deposit the funds to your account. It is also an indication that the repayment process is starting.
Get the best service that you deserve from the cash advance firm! Go to CrowdReviews.com and read their reviews of merchant cash advance companies.
Trevor Price
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