In times of crisis, small businesses sometimes require additional financing to strengthen their cash flow. One option for quickly obtaining the working capital you need is a merchant cash advance. Here are some things you need to know about this form of funding so you can decide if it is right for your company.

How a Merchant Cash Advance Works

A merchant cash advance differs from a traditional loan in that it is an advance on credit card sales. Your business receives a prepayment on future credit card transactions, and you pay back the lender with a percentage of upcoming sales. Your daily payment rate varies depending on sales volume.

Companies Benefiting from a Merchant Cash Advance

Merchant cash advances are popular with companies that sell goods online because payments to these businesses are invariably in the form of credit card transactions. Seasonal businesses can benefit from this form of funding, which can help them maintain steady cash flow during slack times. Businesses can obtain financing from merchant cash advances when they want to avoid the appearance of a loan on their credit reports.

Qualifications for a Merchant Cash Advance

The main qualification for a merchant cash advance has to do with the volume of a company’s credit card sales. This is because the advance is paid back using a percentage of credit card income. To receive an advance, you have to use a credit card provider authorized by the lender. This may necessitate switching credit card companies or finding a lender that accepts your present provider.

Advantages of a Merchant Cash Advance

A merchant cash advance allows you to obtain needed funds quickly. This form of funding can boost your cash flow without locking you into scheduled fixed payments. Instead, you have the confidence that your payments will never be greater than a percentage of the amount that you earn in sales.

For more advice on obtaining financing quickly through a merchant cash advance, get in touch with Coastal Commercial Lending.