When Should You Consider a Merchant Cash Advance?

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When Should You Consider a Merchant Cash Advance?

6 August 2020
 Categories: , Blog


Businesses live and die on their ability to control cash flow. Many companies experience dry spells followed by periods of unusually high income, and this unpredictable revenue can deplete cash on hand or force unsustainable levels of debt. Small businesses that operate seasonally or year-round businesses with peak months can be especially vulnerable to erratic cash flow.

Business cash advances (sometimes known as merchant cash advances) offer an alternative to surviving on the whims of fickle consumer habits. Your business pays these loans back by automatically sending a share of purchases to the loan servicer. Although this type of loan can be advantageous for many business owners, there are a few situations where cash advances are especially useful.

1. Unexpected Dry Spells

Cash advances can be a superior option to traditional loans when low-income periods strike unexpectedly. If you don't have an existing relationship with a loan servicer, then applying for a business loan may not get cash into your coffers quickly enough to cover regular expenses. Merchant cash advances provide money almost immediately, allowing you to cover your bills right now.

In addition to getting money into your hands quickly, a merchant cash advance doesn't saddle you with a set repayment schedule. This payment flexibility can be especially helpful if you don't know when sales will pick up again since and don't want to saddle your business with another monthly payment that you may not be able to cover.

2. Poor Credit

Businesses can suffer from poor credit for any number of reasons, and you may be dealing with this situation through little fault of your own. Unfortunately, bad credit can lead to a financial death spiral when times are tough. If your business doesn't have the credit to qualify for a traditional loan, then you may face disaster if sales slow suddenly. Merchant cash advances typically do not require prime credit scores, however. Since you automatically repay the money you owe through credit card sales, you can often qualify with poor credit and without the need for substantial financial disclosures.

3. Big Paydays

Cash advances can also work well if your business needs money to pursue an opportunity with a quick turnaround and significant payout. Since a cash advance is available right away, you can put that money to use almost immediately. With a hefty amount of cash flow on the way, you'll also be able to pay off your cash advance much more quickly.

Like any other financial product for your business, cash advances work best under certain circumstances. Knowing when to use these valuable tools can help your business to survive through even difficult times. Contact services like Speedy Biz Loans to learn more.