Merchant cash advances are a great finance tool for the small business owner. While there are many business funding options out there, traditional sources of financing are not always easily accessible. Without the ability to boost cash-flow, small businesses can quickly run into trouble. Merchant cash advances from alternative lenders – like First American Merchant – provide a fast solution to this problem.
The following are 5 benefits of using a merchant cash advance that small businesses can take advantage of:
1. “High-Risk” Businesses
There are many business types and industries banks and traditional lenders consider too risky to work with. While there are many reasons why a business may fall within this category, some of the most common are: bad credit, insufficient credit history, high sales volume, chargebacks, limited regulations, etc. Unwilling to deal with the potential risks, banks simply turn these “high-risk” merchants away.
Alternative lenders like FAM specialize in offering these businesses flexible business funding options, merchant accounts and safe payment processing. Their services are tailored to meet the needs of each industry and business type it works with, regardless of credit score, time in business, high sales volume and chargebacks. (Typically, getting a merchant account with bad credit is impossible with a traditional provider.) They are even willing to work with business placed on the Terminated Merchant File (TMF) list.
As stated previously, banks are hesitant to work with those with insufficient credit history; this obviously adds startups to the long list of business types traditional lenders won’t touch. A cash advance provides the perfect solution to a startup’s financing needs. Not only are alternative lenders happy to work with startups (unlike banks), they also provide quick cash the business can use to hit the ground running. This capital allows them to hire new employees, cover payroll, purchase new equipment and inventory and finance overall growth.
3. Easy, Flexible Collections
It’s important to note that a merchant cash advance is not a loan; it is simply a sale. Essentially, the provider purchases the business’ future credit card sales at a discount in exchange for a cash advance. With FAM, the amount purchased and at what discounted cost are agreed upon by both parties. The amount, along with the agreed upon fee, is then paid back as a percentage of the business’ daily sales. During busier months, the business pays back more. During slow seasons, it pays back less.
4. Hassle-free Application Process
When working with a traditional lender, merchants deal with long wait times for funding. Businesses wait weeks or even months – only to find they’ve been declined. The application process for a cash advance, on the other hand, is known for being simple, fast and hassle-free. With an alternative lender, merchants can submit the application in minutes, and receive funds in less than 72 hours (if not sooner). Because approval for the merchant cash advance is based on business performance rather than personal credit, time in business or financials, merchants have quick access to the cash they need for growth.