Banks tend to use strict lending criteria on loan applications. This leads many business owners to wonder if there are easier options for business financing. One of the ways that businesses may fund a company is to use credit card sales as collateral. When you offer a portion of future credit sales, you are utilizing a merchant cash advance. If you know the benefits of an MCA, it might help your business in the future.
Bank loans come with restrictions on how you can use the money. With an MCA, you have more options. As long as the funds go towards the business, you can use them for virtually anything. Here are some examples of common uses:
- Equipment purchasing
- Opening new locations
- Product line growth
- Business expansion
- Paying taxes
- Debt consolidation
- Payroll payments
- New employee training
- Office remodeling
The financing company does not require you to show them an accounting of how you spent the money. With bank loans, you do have to provide proof for how you spent the funds.
The freedom to use your money how you want is one of the biggest benefits that this type of financing offers you. However, this is not the only advantage. One thing that you should know is that an MCA is easier and quicker to receive than a bank loan. If you don’t have the time to wait for a bank’s decision, this is a great form of financing. In addition, if you are in a unique financial situation, the financing company may still approve you. For instance, where banks may deny you for the following, merchant cash advance financing companies won’t:
- Experiencing a low cash flow
- Having few assets
- Having bad or no credit
- Doesn’t fit the traditional financing criteria
Since you are not applying for a loan, this is a good idea if you are short on cash. The approval does not hinge on your credit score and your transaction does not end up reported to the credit bureaus. Likewise, it’s easy to pay off because the percentage of sales automatically sends to the MCA company. You don’t have to keep track of payments every month.
If you don’t think that you would qualify for a bank loan or if you need the money quickly without all of the stringent rules, then a merchant cash advance might be the perfect solution. You don’t have to meet all of the loan qualifications and you get your money quickly.