Merchant Financing is a form of business funding that involves receiving cash upfront, with a promise to repay from credit card sales that you make in the future. More often than not, business owners consider this kind of financing as the last resort. What you need to know is that this option has its pluses that can make the option very appealing.

Why Merchant Financing?

The following are some of the reasons why you should consider merchant cash advance as the best option to finance your business:

  1. a)    Merchant Cash Advance Financing is quick

In most instances, applying for a merchant cash advance is very easy and fast. Since most financing providers conduct their business online, the requirements to qualify for this form of business funding are very few. Most providers will only request that you submit the daily credit card receipts or history for a certain period of time. Once they review them and determine that you can repay the advance, the money can be deposited into your business bank account in a week’s time or less.

  1. b)    If your sales are low, your payment might be low too

With merchant cash advance, the repayment schedule is often based on a predetermined fixed percentage of the credit sales you make. In such a case, your repayments will be adjusted depending on how well or poorly your enterprise is performing.

  1. c)    You don’t need to worry about losing the collateral

Interestingly, merchant financing options, especially the merchant cash advance does not require that you put up any form of collateral. They are unsecured therefore you do not need the collateral. What this implies is that you will not lose or forfeit any of your business or personal assets if you don’t make the repayments on time.

If your business collapses, for instance, that might mean a loss to the financing provider. In most financing options, repayment is not absolute. However, your financing provider might require that you make a personal guarantee, for instance, in the form of a written statement or agreement that you are personally responsible for the repayment of the advance. In such a case, the merchant cash advance providers might still seek to recoup their losses in other ways.

Considering the above benefits, you might find it better use merchant financing to cater for your business needs instead of waiting up on the traditional forms of financing like banks. Also, despite the upsides of merchant cash advance, you should understand that there is no perfect form of business financing.

You should keep the following downsides of merchant cash advance in mind while making the choice of a business funding option:

  •    The interest rates for this financing option is often higher than some other types of business funding
  •    Since merchant cash advances are not considered as loans per se, they do not improve or hurt your credit record.
  •    Be wary of falling into the trap of a debt cycle, irrespective of the merchant financing or any other business funding option you choose.