It is not unusual for even the savviest business owner to find themselves in need of a quick cash injection.
When we think of a business loan, most of us imagine dealing with a big bank and trying to secure relatively large amounts of money. This is fine for large businesses and big corporations but is a bit more difficult for small independent businesses and individuals.
For those whom the traditional business loan from a bank isn’t practical, another popular source of funds come in the form of business cash advances, known in the industry as merchant cash advances (MCA). There are a number of advantages to this type of loan, from the perspective of small business owners.
No Risk to Collateral or Credit
Traditional business loans are either backed up by collateral, something physical which is forfeited if the customer is unable to meet repayment requirements, or they rely on the good credit standing of the applicant. Defaulting on a business loan can, therefore, have very serious ramifications for individual’s financial futures.
In contrast to this, an MCA is considered to be a sales transaction and therefore it stays off your credit report. This means you can take an MCA out to secure funds quickly for your business, safe in the knowledge that you aren’t risking your entire financial future.
Quick and Simple Applications Process
Unlike a business loan from a bank, which often requires a deluge of paperwork, an MCA is a quick and straightforward process. It is not only a lot faster than taking out a bank secured loan but it is also much less stressful. As a general, rule the MCA provider will only want an overview of your cash flow to ensure that there is a realistic prospect of the loan being repaid, although the exact requirements will vary between lenders.
Get Your Cash Fast
Because there is less paperwork involved, you usually get access to your MCA much more quickly than you would get access to a traditional loan. This makes the MCA very useful for small businesses who often run on a much finer profit margin than their larger counterparts. Small businesses are more susceptible to unexpected cash flow problems. An MCA can give small businesses enough wiggle room to overcome temporary cash flow problems.
Securing a business loan requires an underwriting process which can take weeks, even months in some cases. An MCA, on the other hand, is usually available after only a few weeks, which can make a huge difference if a creditor is breathing down the businesses neck.
Paying Back Is Easier
MCAs usually do not have to be repaid until the applicant brings in a certain amount of revenue. The amount repaid at each interval is also proportional to the amount that they are earning. This is in contrast to a business loan, where monthly repayments have to be made on time and in full every month. MCAs must be repaid on a monthly basis, but they take into account how much money the business has made rather than always demanding a fixed amount.
Higher Approval Rates
MCAs are approved at a much higher rate than traditional business loans. This is because MCA applications are assessed on the basis of how your business is performing rather than your credit score and financial history as an individual.
This means that, as long as your business is in relatively good health and performing close to expectations, you are likely to get approval for an MCA. If you think that an MCA could help your business then approach a reputable company such as Merchant Money – check the Merchant Money website for more information.
The MCA is, therefore, a much more flexible funding option that can offer businesses a lifeline when all other options have been exhausted. Given how turbulent the commercial lending market has been in recent times, the MCA has been the difference between many businesses surviving and failing.
An Option for Everyone
The MCA is suitable for all types of business, including sole traders and partnerships. MCAs are used by retailers, pubs, clubs, restaurants, entertainment venues, beauty salons, and all manner of retail and service providers.
As a business expands in size and grows its operations, its working capital demands will also rise in proportion to the expansion. The MCA is an excellent way for small businesses to secure the cash injection that they need to grow and increase their revenue. Unlike a business loan from a bank, where there is potentially months of checks to carry out, paperwork to obtain, followed by a further wait for funds to be released, an MCA is a viable option for any small business as its repayments are tied to the performance of the business.