There is no doubt that one of the most significant challenges facing small business owners at present critically centers on finance. Even though other problems like those bothering on innovation are still persistent, the issue of maintaining adequate cash flow remains a major one for the vast majority of businesses. A small business must strive hard to maintain a realistic working capital balance.
This is for it to be able to manage a normal trading cycle without unnecessary hitches. If a small business, in particular, fails to understand this and procure the necessary volume of working capital, its cash flow requirements can threaten the very existence of the business. Because of this, most businesses—around 80 percent—have had to rely on funding to maintain adequate cash flow within the business. But, recent events have shown that merchant cash advance application to small businesses might as well be the solution to the lingering problem of lack of business funding. Let us confidently show you this.
It is not that funding is unavailable to small businesses; the point is that funding, especially through the traditional sources such as commercial banks, have become virtually out of the reach of the vast majority of small businesses that hardly seem to meet the requirements for obtaining business finance. This could perhaps explain the recent proliferation of merchant cash advance providers in the country. Better still, small business owners have come to terms with the fact that merchant cash advance application to business is the right way to go, falling heads over heels in love with cash advance providers. Either way, the impact of merchant cash advance providers continue to be felt all across the country.
Starting out small and having less than 100 practitioners a few decades ago, merchant cash advance providers now number over one thousand. The core objective of them all has been to make business funding available to almost any business that is in need of working capital. In spite of how much popular merchant cash advance application to small businesses has become, there is still some confusion on what it is, and also why it appears to be relatively more expensive than other sources of lending. Hopefully, we should be able to throw some light on all of these issues, beginning with what merchant cash advance entails and how it stands as a better option when compared with the traditional mode of financing a business through bank credit.
Merchant cash advance—knowing more about it?
Simply put, a merchant cash advance involves a business selling its future receivables to a merchant cash advance provider in exchange for cash. Merchant cash advance application to business demands that a business gives the merchant cash advance provider a stake in its future credit card sales. In essence, a merchant cash advance is a commercial transaction in which a business sells its future credit card sales to the merchant vendor.
For the fact that it is structured as a sale, merchant cash advance application does not impose on the merchant an obligation to repay the loan. The cash advance is tied to the credit sales of the business and as such the merchant is only expected to make payments when it is making sales on generating revenue. Otherwise, should the business fall into hard times and eventually fails, the merchant cannot be held responsible since he is not personally responsible for repaying the loan. In short, in such a situation the merchant cash advance provider suffers a complete loss.
What are the requirements for obtaining a merchant cash advance?
Before a business can be thinking of merchant cash advance application, there are certain requirements it has to fulfill. The first of these is that it has to accept credit card payments whether MasterCard or Visa. That is not enough. The business must also fulfill the vast majority of its face to face business transactions through credit card payments. In essence, it must be generating enough revenue to qualify for an advance since the amount of funding it can receive is in any case tied to its volume of credit card sales. In most cases, a business is allowed to receive as up to four times of its monthly sales.
Most merchant cash advance providers understandably insist on minimum monthly revenue of $5000, although few would accept much less. A business is also expected to have a physical location before thinking of merchant cash advance application as virtual businesses are excluded from receiving a merchant cash advance. Finally, even though merchant cash advance providers do not base their decision of whether or not a business is to be issued an advance on its credit score; it is still required for the business to have a minimum score of around 50 before it can be considered for an advance.
The above-stated requirements are simply the ones that apply to the vast majority of merchant cash advance providers, as such; one can expect the requirements of individual merchant vendors do be slightly different from those of others. They are not stiffening, are they? No! Be that as it may, once a business meets all of the minor requirements it can rest assured that as soon as it makes the merchant cash advance application to the concerned provider, it would most certainly obtain the advance.
Reasons why a small business should give serious thought to merchant cash advance
There are lots of reasons why a business should opt for merchant cash advance application. For most small businesses it is the fact that they can obtain funds quickly and easily that has endeared them to merchant cash advance providers. With merchant cash advance providers a business can receive funds in a matter of days whereas the same process could take several weeks in the case of commercial bank loans.
Businesses also find it attractive that they do not have to tender collateral or offer any form of personal guarantees before receiving funding. Most importantly, small businesses are aware that it is only with a merchant cash advance application that they can be certain that requests for loans will most likely be accepted since the approval rate of merchant cash advance is way beyond 90 percent. And although some business owners tend to object to merchant cash advance due to its relatively higher cost, others have found that merchant cash advance is a perfect alternative to commercial bank loans.