Why Getting a Small Business Loan from Merchant Cash Advance Lenders is a Good Idea

getting a small business loan

Getting a small business loan from merchant cash advance is something that small businesses should seriously consider, especially when it has proven to be difficult to obtain through traditional sources. It is quite true that the merchant cash advance industry is one that has been heavily misunderstood. The common perception is that it is much more expensive than loans from conventional sources.

Although this is somewhat true, what is commonly overlooked is how beneficial the merchant cash advance industry has been for small businesses. Indeed, merchant cash advance providers have sometimes made the difference between the success and failure of a business.

When does getting a loan from merchant cash advance providers become useful?

Taking advantage of a rare business opportunity

Getting a small business loan from merchant cash advance providers is especially important when a business is seeking to take advantage of an unexpected opportunity that can generate income for the business at a favorable return on investment. One can only imagine a restaurant that is faced with a rare opportunity of purchasing inventory at a significant discount only if it pays in cash first.

If it happens that the money it requires to purchase the inventory is not immediately available then only merchant cash advance can salvage the situation being that the typical commercial bank loan will probably take months to process. Even if a merchant cash advance might be the more expensive source of funding, as long as the business is sure to make a reasonable profit, it is best to opt for merchant funding.

To manage fast growth

If a business is experiencing fast growth and it is in need of money to manage this fast growth then getting a small business loan from merchant cash advance providers is likely the right way to go. Because businesses that are experiencing a fast growth are often cash flow challenged while they wait for customers to pay and at the same time keep investing in the business.

Because business will be fully focused on growing the business, it is important that they have a guaranteed source of emergency funding in case of emergency cash flow problems. Only merchant cash advance providers can provide such level guarantee being that mca loans have an approval rate that far exceeds 90 percent.

To avoid the negative aspects of other lending options

A business can consider getting a small business loan from merchant cash advance providers if it wishes to avoid the negative aspect of other lending options. These negative aspects can be judged by the business to outweigh the cost of a merchant cash advance.

For instance, a business might not want to have to deal with having to pay a fixed amount each month to some bank. Such a business might consider it preferable for it pays according to how much it ears, which is exactly what merchant cash advance offers. In merchant cash advance a business pays a fixed percentage of its daily sales to the merchant lender, meaning that the more it earns, the more it pays and vice versa.

To cover an unforeseen event that could seriously impact the business

When an unforeseen event occurs, which can mar a business; it becomes really important for the situation to be dealt with immediately if the business is to survive.  One can only imagine a restaurant business that has its electrical system shut down in the middle of the summer. Of course, without electricity, there would be no light, no air conditioning.  

This means customers will turn away and the business loses its potential revenue. Getting a small business loan from merchant cash advance providers is the most practical thing to do in a situation such as this if the business cannot raise the money for the repairs from within the business. Time and again merchant cash advance have proven to be the most reliable source of funding for pressing situations.

When getting a small business loan from merchant vendors might not be a good idea for a business

In spite of the numerous benefits of merchant cash advance, there are times when getting a small business loan from merchant cash advance providers might not be a good idea.

Setting up an emergency fund

Because of the relatively higher cost of a merchant cash advance, it might not be practical for a business to obtain a merchant cash advance for use during a future crisis.  The pricing of a typical merchant loan is too high for the working capital to sit idle in a checking account. Instead, an MCA is to be put to use immediately.

Making frivolous purchases

Getting a small business loan to make purchases that cannot generate income for a business is not a good use of merchant cash advance. If a business is getting a merchant cash advance because it wants a fancy door for example, then it is a misuse of the merchant loan.

When other options have not been explored

A merchant cash advance is not meant to be the first point of call for business except under emergency situations. A business is supposed to explore cheaper options such as term loans first before considering merchant funding. If a business is unable to obtain funding from traditional sources then getting a small business loan from merchant cash advance is the best thing to do.

Using the money to float an otherwise sinking business

A merchant cash advance is not supposed to be used to “float” a business that is already on the verge of collapse. Taking out a portion of the daily revenue of the business to pay the merchant cash advance lenders will seriously affect the cash flow of such a business. This might hasten the demise of the business.

Conclusion

Getting a small business loan from merchant cash advance lenders remains a good idea if it is used for the right purpose. Indeed businesses that used merchant funding when it was needed have often come back to merchant lenders as they found it rewarding. In a nutshell, a merchant cash advance might not be the best option at all times, when it is, it is sure worth the price.

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