The Basics of Using Merchant Cash Advance

When looking into funding options you will probably find that a merchant cash advance is something that appeals to you. This advance is taken based on the amount of credit card transactions you receive and is repaid through a portion of your daily card sales automatically. Since this portion is a fixed percentage, on days you make less, you pay less to the balance. There are some basics you should consider before applying for this financing option, however, because it is not right for every business.

Set Goals

The sooner you know where you will spend your funding, the easier it will be to narrow down your financing options. Having a plan will also help you spend the money where you need it instead of where you do not. For example, if you know that you will need additional funding to start a marketing campaign, then you can get an advance and put that money directly into your marketing budget.

Research Options

A merchant cash advance is a good option for companies that do a lot of card transactions every day. Some common examples include restaurants, hotels and retail stores. This is because you are essentially letting a company purchase your future sales if you do not have many that qualify, then you will not be approved. It is important to read the fine print on the application and terms to make sure that you are not paying too much in interest and budget out how much of a daily percentage you can afford.

Collect Your Paperwork

There is significantly less paperwork to getting this type of advance than there is to get a bank loan, but you will still need to prove how much you make from credit card sales. This means gathering up a couple of months’ worth of bank statements to upload with your application.

Avoid Negative Balances

If you have a history of delinquent payments and negative balances, the provider will probably decline to work with you. This is because they want to have confidence that you can repay the advance and look to your history to determine your payment patterns and extrapolate those forward.

If you often process credit card transactions, then a merchant cash advance may be the right financing option for you. These advances are repaid automatically through your daily card sales, giving you one less payment to remember. It is a good idea to make sure that your banking history is strong and that you read the fine print before applying for an advance so that you can get approved easier and know what to expect.