Working capital and access to it are the lifeblood of a growing company. Traditional loans, however, can be difficult and time-consuming, and require stellar credit by the business owner.
As online lenders have grown they continue to offer small business financing solution alternatives. One of these is merchant cash advances. Below we shall highlight the advantages and benefits of this type of financing to grow your business.
Debt, as in all other aspects of business, requires planning and management. When a business is growing, cash flow, expansion funds, and inventory or equipment is a necessary aspects of business management.
MCA can be an excellent tool to fulfill your business needs.
Running a business requires cash to make it run. This is true of recurring overhead, such as rent, salaries, supplies, and utilities. An MCA loan can be used as a stabilizer to ensure your cash flow remains constant and cash is available when required.
If you don’t have inventory, you have nothing to sell; and without sales, there is no income or profits. An MCA loan provides the safety net so that you can maintain stock, sell products, and earn profits.
No matter how well you plan, unexpected costs will arise. Whether it is an emergency equipment failure or late payments by a customer, unexpected costs have to be factored into any business plan. An MCA can be the perfect short-term loan relief to address that.
The pandemic has wreaked havoc on businesses all over the world, and the financial pains from that may linger for years to come as the world economy begins to stabilize. PPE purchases to keep staff and customers safe, and a shift in expected revenues can be just some of the hurdles your business has had to overcome.
Financing can help business owners avoid unnecessary layoffs and furloughs while retaining the talent that they worked so hard to find, and the teams they’ve worked to build.
Cash may be king, so don’t deplete cash reserves on long-term, big-ticket purchases. A merchant loan can fill that gap and relieve the need to tap short-term cash on long-term investments.
If you maintain a physical retail location, making a late rental payment can often require additional late fees and penalties. With an MCA loan keeping your cash-flow moving, you’ll have the funds on hand to make critical payments, on time.
If you have ever been faced with owing more in taxes than projected, this is a perfect time to be able to tap an MCA loan. It can serve as a cash bridge that you can then pay off over time so that you don’t disrupt your day-to-day cash flow.
Business cash advances can be used for bringing in new talent, both for talent search, and new hires’ training. The right employees can make or break a business plan, so invest in the best you can obtain.
A merchant cash advance (MCA) provides a cash advance against a percentage of future sales. This is a great tool for business owners that have sales but lack the personal or business credit to acquire a traditional bank loan. It is sometimes referred to as a credit card loan, as it is usually a tool for businesses that accept credit card payments for products and services.
As indicated in the name, it is an advance, not a loan. It is based on sales history, not creditworthiness. The agreement states that you’ll pay back the advance with a percentage of future sales on a daily basis.
The payback amount usually has a fixed payback amount, which is factored into the monies withheld when the credit card receipts are paid out to you until the advance is cleared. Although, many businesses use this on a recurring basis to stabilize cash flow.
Businesses that use merchant financing tend to use the bulk funds to purchase inventory, expand marketing, or stabilize operational cash flow during peak and off seasonal spikes.
Merchant financing is used by a wide variety of businesses, including:
For businesses that process a high volume of credit card transactions, this could be the right funding tool.
MCA application requirements and approval tend to be much easier and faster than traditional financing methods. Once approved, you will usually receive the funds in your bank account within 24-48 hours.
To get started, apply online or call Franklin Merchant Capital at 1 (888) 881-7860 and speak with a loan specialist. We then analyze your information and arrange the corect funding source. Our loan specialist will work one-on-one with you through the entire process, which is quick and easy.
The standard requirements will include:
Finance companies assess your time in business to determine your creditworthiness as a way of establishing their risk of getting paid, or not. The longer you’ve been in business tends to suggest the lower risk to them. But less time in business doesn’t preclude your approval, as long as you’ve been in business for six months or more.
Typically lenders like to know that you have enough cash flow to pay down the cash advances you take, which equates to a minimum of $10,000 in monthly sales.
A credit rating is s snapshot of your payment history, and the credit balances you maintain. For this reason, it is always suggested that you work to improve your credit rating by keeping your loans moderate compared to your income and making timely payments.
Franklin Merchant Capital takes a holistic approach to determining client eligibility. However, we work with clients that have both stellar and not-so-stellar credit scores. You could be eligible with a credit score as low as 550. But, obviously, the higher the credit score the better chances you have for approval, and will receive better terms.
Financial institutions use a debt-to-income ratio as a metric to compare the amount of debt you have against your overall income. MCA will also use this metric to assess the loan size that you can reasonably repay timely. The lower the debt-to-income ratio the better.
The right type of financing for your business depends on your unique business model and objectives. Here is a list of the most popular types of financing for your business:
Business owners that want a predictable loan agreement with regular payments, may opt for a term loan. It consists of a bulk loan for your business, and pays interest on the total amount, until such time that the entire loan is repaid. Typically, unsecured loans will require collateral.
This is very similar in principle to MCA financing. The only significant difference is that the first is financed against outstanding receivables, whereas the latter is financed against future merchant sales.
For maximum control and flexibility, a credit line preapproves you to borrow money when, and if you need it. You only pay interest on the capital you use, but have a credit line that you can draw upon when funds are needed.
For businesses that need to buy or rent equipment and/or machinery, there is Equipment Financing. A borrower with limited credit can still be approved, as the equipment or machinery in question becomes the collateral.
If you’ve been in business for a minimum of six months and have at least $10,000 in monthly sales, a Merchant Cash Advance can be obtained quickly, without personal collateral. The process is easy with a quick funding turnaround.
You’re essentially taking an advance against future credit card sales. For business owners with less than excellent credit, this is a great opportunity to get the working capital you need.
Franklin Merchant Capital is your concierge to sourcing the funding you need to grow your business!
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