3 Things To Know About Merchant Cash Advances
You may have heard that a merchant cash advance is a way to get money quickly for your business. You might need the funds to buy something crucial for your business or to help you stay afloat during a slow season. If you need money fast, this is probably one of the best ways to attain it. However, there are some things you should know before you decide to apply for a cash advance. There are a few positive qualities that business owners will find valuable, but there are some cons that you need to keep in mind. Here are three things you should know about business cash advances.
1. You Do Not Need Good Credit
If poor credit is holding you back from getting a loan, a merchant cash advance could be an option. Traditional loans and lenders want to see a solid credit history and a good credit score. If you are working on your credit and still need money for your business, a cash advance can give you the necessary funds. Instead of collateral like real estate or other goods, the only collateral required is your future credit card sales. However, keep in mind that your business needs to bring in enough money each month to cover the repayments.
2. APRs Are High
Unfortunately, one drawback to a merchant cash advance is the cost. They are one of the most expensive forms of financing. It is why they should be used sparingly and under the right circumstances. They can be costly for small business owners. Because of their structure, they do not help you build business credit. Factor rates can make it challenging to know how much your cash advance may cost you. It makes funding your business more complicated. Before deciding that a cash advance is right for you, take some time to research and see if your business can afford it.
3. Startups Can Qualify
One reason startups have trouble getting loans is the number of years they have been in business. Since they are new companies, they do not have the business or credit track record that many lenders require. A cash advance does not rely upon good credit scores or a perfect business record. You only need strong daily sales and make enough money to make monthly payments.
These three tips should help you decide if a merchant cash advance is right for you. There are numerous loan options available, so research to see what suits your needs.