The business cash advance can be an incredible approach of financing for many small business owners. However like any other financing option, there are both advantages and disadvantages to the business cash advance. Make use of the following list to find out whether a business cash advance is the right option to your business enterprise.
Here are some advantages and disadvantages of merchant cash advance, so you can locate your financing requirement and get the best deal that can fulfill your financial requirements.
Cash Advances Are Renewable
Small business owners can renew their cash advances once they’ve paid back almost 60% of a business cash advance. While renewing the cash advance, there’s no need to fill an additional loan application and the cash advance lenders can transferred the merchant cash advance amount into the borrower’s bank account in as low as 48 hours. Small business owners can renew their cash advances as often as they want.
Cash Advances Have With Minimal Requirements
Unlike other conventional business financing programs, there are only a few requirements for business cash advance qualification. The qualified business owners are the ones who have owned their businesses for at least six months, processing at least $3,500 in their monthly credit card sales, haven’t experience any unsettled insolvencies or bankruptcies and have a minimum of 12 months remaining on their business leases.
Cash Advances Have Flexible Repayment Terms
The borrowers of business cash advance do not need to make fixed monthly payments. The cash advance for business is repaid all the way through their business daily credit card sales. In different terms, every time a customer uses a credit card at the borrower’s business in order to pay for purchased product, a small fraction of those sales goes towards repaying the merchant cash advance. There is no set term; I mean no set time frame in which the borrowed amount of cash advance must be paid back, even though it normally takes almost 6-8 months to completely repay the cash advance.
Only For Retail/Service-Orientated Businesses
Small business owners who do not run merchant businesses cannot apply for a business cash advance, because as stated above, the cash advance repayments are only made through a small fraction that is automatically deducted from every day credit card sales of a business.
Cash Advances Are Expensive
Business cash advances are more high-priced as compared to any other bank loans because the cash advance lenders take on a much bigger risk as compared to banks. For that reason, businesses who meet the criteria for bank loans are encouraged to take cash advances instead.
Cash Advances Are Not For Startup Businesses
Business owners need to build up at least a six-month history before becoming qualified for a business cash advance, because lenders use candidates’ monthly credit card sales to come to a decision how much they qualify to get.
Startup businesses do not have a history and/or business financial statements and for that reason are not entitled for a business cash advance.