Merchant cash advances are among the most popular methods of raising quick capital for business. By definition, an advance is an immediate financial advancement, which is given to a merchant in exchange for a share of future credit and debit card receivables.
A MCA shares a few similarities to a loan, most importantly the aspect of paying back the money borrowed by the end of a stipulated time. However, it’s often a great alternative to a bank loan because it allows for much needed financial flexibility, provides immediate funding, and is quickly processed.
Nevertheless, MCAs still need repaying. Before applying for one, therefore, ensure you have a plan on how you intend to use the funds, based on what is best for your business.
Here are five ways you can use a merchant cash advance to your advantage:
Raising your brand’s awareness not only brings in new customers but also reminds old ones about your business.
A MCA can provide the funds you need to implement new advertising strategies, such as internet postings, newspaper ads, or vehicle wraps.
- Paying off existing debts
A MCA can help to relieve the pressure of paying loans, taxes, and vendors by giving you more time to increase sales, or for your receivables to come through. Because cash advances are paid by small pre-defined percentages of daily sales, many merchants find them easier to clear than actual loans.
- Seizing opportunities
If an unexpected event causes a sudden increase in demand for your business, you will need quick cash to meet the needs of your new customers. The fast and easy application of MCAs makes them the best funding choice for those opportunities. For instance, if a federal investigation finds your competitor guilty of tax evasion, a cash advance will help you take advantage of the incoming wave of new customers and maximize profits.
- Expanding your operation
Once you’ve established your business, your next goal is to grow your customer reach by acquiring more inventory, opening new locations, and hiring more staff. With a MCA, you can get the funds you need to expand, while still having enough to keep your business on its feet.
- Cover existing expenses
Despite how good your business plan is, unexpected costs can always occur, and can significantly reduce your cash flow. A MCA will give you the financial flexibility to pay your employees, clear utility bills, buy supplies and deal with new expenses comfortably.