There is no doubt that Merchant Cash Advances (also known as MCAs) have gained considerable popularity in recent years as an excellent short-term business funding option. They are especially popular among America’s smallest businesses, and those businesses that generate credit card sales. MCAs are extremely efficient, as they can provide easy and hassle-free access to funding. Also, keep in mind that this kind of business funding is not a loan. Rather, it’s a lump sum advance that you get in exchange for a specific percentage of your future receivables.
Common Ways Businesses use Merchant Cash Advance Funds
Here are common ways business owners use a merchant cash advance.
Buy Inventory
As your business grows, customer demand will increase. Although this is excellent for your small business, it may work against you eventually, especially if you frequently run out of your most popular products and items. Note that if you cannot meet your customer’s demands, they will most likely take their business to your competitors.
Businesses that generate a high volume of credit card sales, like retailers and restaurants, often use merchant cash advance funds to purchase inventory and then remit payment on the advance using a specific percentage of the receipts/receivable collected. A merchant cash advance can enable these businesses to sell and then easily profit from inventory that they would not have otherwise been able to initially obtain.
Update Marketing Strategy and Materials
It is no secret that marketing, particularly in today’s competitive digital marketplace, is important for small business growth and expansion. As most consumers now look for products and services on the internet, a solid and viable online presence is essential.
You will have to invest in a business website, social media, and reputation management in addition to traditional marketing. There is no doubt that investing in updated marketing is a good use of money and many businesses use a merchant cash advance for this purpose.
Cover Unexpected or Emergency Payments
One of the primary benefits of using a merchant cash advance as opposed to a conventional loan is a much more efficient and simpler application process, as well as a shorter time to funding.
In many cases to qualify for a conventional loan you will need to supply several years of personal and business financial statements such as tax returns, accounts receivable and payables, operating agreements, etc. A merchant cash advance will typically require much less, often just a few months of banking history and a one-page application. So, if you need quick access to cash to cover any unexpected expense for your business, such as an emergency repair, there’s no faster and simpler way to obtain the money than a merchant cash advance.
Pay for Seasonal Costs and Expenses
If your small business is seasonal, you will benefit from getting a merchant cash advance before the arrival of that busy season. This will allow you to maximize the revenue potential during what should be the best time of the year for you, which for most seasonal businesses is vital to making it through the slower season(s).
For example, retail businesses that make most of their sales around the holidays tend to invest in extra inventory and hiring additional employees during the early fall months with the help of a merchant cash advance. So, if you operate a seasonal business, a merchant cash advance can help you achieve your goals!
Industries that Use Merchant Cash Advances
Retail Stores
Did you know that many retail stores experience unstable and volatile business trends? So, if you are the owner of a retail business that tends to experience a lull in sales, having access to outside funding can l help ensure that your retail business remains operational and profitable. As mentioned in the previous section, despite proper planning, small business retailers can often experience a cash flow shortage during their offseason.
With merchant cash advance funding, retail stores can easily and continuously restock inventory, which helps the business take advantage of all opportunities to make a sale.
Auto Repair Shops
To keep up with the latest technology, most repair shop owners must keep their business outfitted with the most updated equipment.
These businesses often rely on merchant cash advances to buy equipment and meet other needs. If you own a successful auto repair shop, most likely you have steady base of repeat clients built up over the years, that provides a consistent stream of revenue.
As a result, you can remit a specific percentage of your revenue until you satisfy your debt obligation. This eliminates the fear and risk of not meeting a strict payment schedule.
Final Thoughts
These are some of the ways businesses use merchant cash advances. You should make sure you understand how to best use a merchant cash advance loan before proceeding.
About Small Business Funding
We are the one stop alternative financing funding source. Regardless if you have bad credit, short time in business, tax liens, judgments, or fast capital needs, we are your solution.
Our philosophy is why work harder when you can work smarter? That’s why Small Business Funding, through our network of financial partners, work with multiple providers on your behalf. Getting you the best rate and terms for your business.
Our network offers you access to quick and easy working capital to meet your individual business needs. We will put together a program to suit your business goals and financial situation, with ease. Why fill out 2, 4, even 6 applications when all you need to do is fill out one?
We recognize that small businesses are the driving force to grow our economy. In good times, as well as the challenging times, business owners need a fast cash flow solution. Whether you use it for payroll, purchase new equipment, expand inventory, pay taxes, etc. Fact is, it doesn’t matter what you use the funds for, as long as it helps grow your business and increase your revenue!
If your company was turned down by traditional lending sources, such as banks and other commercial lending institutions, Small Business Funding can help.
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