Why Should You Get a Merchant Cash Advance?

A merchant cash advance is a form of credit — a loan that can be taken out in advance of your purchases by a financial institution, bank or other organization. These advances are designed to help you cover short-term cash needs incurred while your business is experiencing financial difficulties or is early in its lifetime and lacks adequate collateral to qualify for longer-term loans. As a result, they can be a good option for businesses who are facing a tough season but expect to see a turnaround before too long. 

What are the advantages over traditional loans?

Most the advantages of a merchant cash advance come down to ease and speed of access. A cash advance can make the cash you need available to you much faster, and most lenders are willing to negotiate a flexible range of repayment terms. This gives you the freedom to put that cash towards whatever is necessary, and lenders won’t try to micromanage your use of the funds either. Cash advances also dont require strong credit or any collateral to acquire, so they’re easily available to new businesses or businesses in transitionary periods. 

What Should You Be Careful of With Cash Advances?

The convenience, flexibility, and utility of merchant cash advances do come with some strings attached, though. Among these is a much higher than usual APR, meaning if you dont settle your balance quickly you’ll be stuck with very high interest rates than what you would have with normal loans. Cash advances will also often require minimum daily payments towards their balance. These mandatory payments can cut into your pool of available cash for other projects, including ones that would increase profits enough to pay off the loan faster. What’s more, while you’re paying money towards repaying a loan, with a cash advance often those payments dont actually contribute to your credit score, which can make it difficult to raise your score enough to get more favorable loans.

Good Uses for Merchant Cash Advances

Often, a cash advance is worth it just due to the sheer amount of different uses for them. Cash advances can pay for new equipment or urgent repairs that can’t be delayed until for slower loans clear. Cash advances are also great for securing funding for anything that would be difficult to get a specific loan for. Whatever you need them for, make sure to do your research and get your advance at the best possible rate from the best possible lender.

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