A merchant cash advance is one way for a small business to get the money it needs in a quick manner. Rather than having to wait for their application to work through the appropriate channels, such as those used in traditional financial institutions, a cash advance has a much shorter approval time as well as when the money is turned over to the applicant. When a cash advance such as this is used instead of a loan, it is possible for a small business to have the money they need within a week or even less.
With this quick time frame, a cash advance allows a small business to grow as quickly as the owner desires. The owner is able to take advantage of special offers such as those that allow them to stock up on merchandise in anticipation of some future event like a holiday or store celebration. Or if a great rental place becomes available, this money can be in the small business owner’s hand in time to take advantage of it without the risk of someone else snapping it up.
When it comes to the loan money that is offered by banks and credit unions, they have lots of restrictions on what you can do with it. In fact, in order to gain approval for your application, you will need to lay out a step-by-step plan that outlines what you are planning to do with the money should you be approved. Any deviation too far away from this outline could be grounds for defaulting on the loan and the financial institution could have cause to bring legal action against you.
A cash advance has no such restrictions. You will not need to turn in a business plan or even outline what you are planning to do with the money. There will be no one who holds you accountable for it. Many people have used leftover funds to pay down their own personal debts in order to place themselves on a more stable financial footing while also improving their business.
When using a loan as a way to fund small businesses, a financial institution will almost always want some sort of collateral as well as a personal guarantee in the form of a signature stating that the business owner will repay the loan within a certain time frame. A cash advance does not require any type of collateral nor does it require that the small business owner offer a personal guarantee of repayment. Instead, the whole concept is based around the credit card sales of the business.
The monthly credit card sales of the small business are examined to determine how much money can be advanced against future sales. When repayment begins, it is also based on the monthly credit card sales. A set percentage of each month’s credit cards sales are automatically taken out and sent to the provider of the cash advance as repayment for it. There is also no time frame in which the money must be repaid.