A merchant cash advance is used by many small businesses to get the funds they need to operate, and thus to thrive and grow. In fact, according to a Federal Reserve study, 10 percent of small businesses that sought funding in 2021 applied for a merchant cash advance.   

What is a Merchant Cash Advance?

A merchant cash advance is simply a way that a business can borrow money (get an advance of funds) which will be repaid using a percentage of future credit card sales. It is an alternative to other traditional small business loans. Getting a merchant cash advance requires that a company have a solid stream of credit card sales. The amount of funding provided will depend on the credit card sales volume.

Why Do Small Businesses Use Merchant Cash Advances?

A merchant cash advance can be a great solution for a small company that needs funds to deal with short-term expenses or to handle cash flow shortages. It can also be excellent when a business needs cash quickly without going through the sometimes-lengthy conventional loan approval process or it may not qualify for a conventional loan. It can be useful for a small business in its startup phase, has poor credit, or has experienced prior financial difficulties. According to the Federal Reserve’s study, a higher percentage of businesses are approved for a merchant cash advance than are approved for SBA or personal loans, for example.

How a Merchant Cash Advance Works

A small business must sign a contract with a merchant cash advance lender that specifies the amount of funds that the lender will provide. A payback or “holdback” amount will be stipulated based on a set percentage of daily or weekly sales until the advance, plus lender fees is repaid. Because the repayment percentage is fixed, a business can be relieved of the worry of paying a fixed dollar amount during slower sales periods.

The pros of merchant cash advances are:

• Fast access to funds.
• Strong credit is not required.
• Use funds without restriction.
• No collateral is required.
• Flexible repayment terms.

Seek Expert Financial Assistance

Contact Brave Capital Funding based in Dearborn Heights, MI to meet your needs. We are proud to offer a wide range of loan products and personalized services to provide exactly what you are looking for.