In the current economic climate, it is extremely difficult to secure funding for small businesses. Many banks require a business to prove they are a risk worth taking and this means needing credit scores that reflect an established business with great cash flow.
Often this is not possible, it can put a strain on small business in securing financial aid to help them grow and develop as businesses. This is where a merchant cash advance can help; it is an alternative to a traditional loan and securing it through your merchant company is an option. However, it is important to remember this is not a loan.
A merchant cash advance is using the company’s business sales as a way to purchase future trading potential. It allows a company to then move away from a traditional fixed monthly payment, a common form of repayment in the banking industry, and move to a more flexible approach.
When securing the funding from your merchant supplier, you will agree a percentage of the total sales on credit or debit cards that will form your repayment. If you have generated great sales then your repayment is going to be higher; if sales are poor, this will reflect in the money you receive from the merchant company.
The reasons for funding in small business help to grow and develop a company; often the options that are open to the business are expensive and unless you can provide the information required, the rate of acceptance is extremely low. A recent article on the subject called ‘Merchant Cash Advances Vs Traditional Loans’ discusses this in greater detail, giving data of the acceptance rate of traditional business loans currently, compared to data before the crash of the economic climate.
However, what is vital to any small business thinking about acquiring a merchant cash advance; is to understand fully the principles behind the cash advance and the percentage of the sales that the merchant company will keep. Only when you fully understand all the terms of the advance should you consider signing the agreement between you and your merchant supplier.
Contact First American Merchant for Small Business Funding today!