If you are a startup or smaller business that is just making a name for itself and needs extra cash, finding a lender can be challenging. Traditional lenders, such as banks, require good credit scores and collateral to get approved for small business loans and many other types of financing.

Whether you need to buy additional inventory to get through the holiday season or you are low on cash because you are in the slow time of your seasonal business, how do you get the funding you need if have bad credit and no assets to put up for collateral? Some may steer you into the direction of a small business line of credit, but that’s not a good idea. Though a business line of credit offers you flexible funding, you need a good credit score to get one.

When you don’t have much of a business history, poor credit, and no collateral, you need to apply for merchant loans. Merchant loans, often referred to as merchant cash advances, get you the funds you need quickly without a lot of hassles.

Understanding Merchant Loans

Similar to a business line of credit, merchant loans can help even out your cash flow. However, merchant loans allow you to get the cash you need by borrowing against your future credit card sales. To be eligible for this type of financing, you need to be a business that generates significant credit card sales regularly.

The lender takes a small of the total credit card sales of the business plus all applicable fees that you agreed to when you were approved for the merchant loan. The good news is that repayments ebb and flow with your sales. If you are experiencing slow sales, your repayments will be lower and, therefore, will take longer to pay off. On the other hand, if you are raking up a ton of regular sales, you will pay off the merchant cash advance quickly.

The Major Pros of Merchant Loans

As already mentioned, merchant loan repayments fluctuate with sales, unlike small business lines of credit and traditional loans that require a set payment every month. Other types of loans and financing can really eat into your cash flow because no matter how much you are making, you still are required to make your minimum monthly payment.

When you apply for merchant loans, there are no lengthy applications and several months of waiting for funding to get approved. In most cases, merchant loans are approved within a day or two. This way you have your money right when you need it.

Most importantly, your credit is not a major determining factor. Many lenders will approve merchant loans for those with poor credit scores, which are scores that fall between 500 and 579, and some won’t even if ask for your score. It’s not as important because these loans are based on future sales. The average number of credit card sales that you generate each month is what matters the most.

The Cons of Merchant Loans

One of the major disadvantages of merchant loans are the high factor rates and fees. However, this is the cost that comes with quick cash that injects new life into your business. Additionally, past bankruptcies may preclude you from getting approved.

Get the Funds You Need Now

When you want a flexible way to get the funding that you need to keep your business growing, then apply for merchant loans. Since advance repayments are based on future transactions, you can feel at ease knowing that you will only have to submit a payment based on how well your business did that week or month. Also, merchant loans give you that quick burst of cash exactly when you need. There are no long delays or application processes, just a simple source of flexible financing.

Apply to First American Merchant (FAM). It prides itself on offering funding options to merchants of all sizes and from a variety of industries. To apply to FAM, you only need to submit two to three months of sales and revenue history. In many cases, if you are approved, you get funding within three business days.

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