What are the pros and cons of a merchant cash advance?

A merchant cash advance is the borrowing method that has got everyone talking. Businesses across the globe are seeing the benefits first hand of a new form of loan. So what are the benefits and what are the downsides? Is a merchant cash advance the best thing for you and your business? To help you decide, we have put together a list of positives and negatives to see if a merchant cash advance could transform your business prospects.

Pros

-A quick and easy online application:

Typical bank loans require face to face meetings, business plans and close scrutiny of your finances, both personal and in a business sense. A merchant cash advance is different: it is handled online quickly and efficiently. In fact, you could have a decision on your loan in the very same day. And with 95% of applications successful, a merchant cash advance is a sure fire way to funding, rather than dealing with cautious high street lenders.

-Suitable for all types of businesses:

You do not have to be a global player to qualify for a merchant cash advance: many start ups and small retailers have successfully applied and seen their businesses prosper. It can be a great way to get through dry spells, or as a method of purchasing large amounts of stock or new equipment for a booming business, or offer a solution to help you lease business equipment. And large franchises and multinational companies can tap into the immense potential of working capital that is easily accessible.

-You can apply for a merchant cash advance with poor credit:

A bank or credit union will take a look into your credit history, a move which will often lead to failure in securing a loan. Banks will also ask for collateral to protect their investment. However, a merchant cash advance is not drawn up on your credit history. Even if your personal finances have come into question, you could still receive funding.

-A flexible repayment system that adapts to your needs:

If your business is suffering, your repayments will adjust based on credit card transactions in those months. This means your business can weather even the roughest of rough patches. It also allows for swifter repayments during months where sales improve.

Cons

-Your business cannot be completely new:

As a merchant cash advance is calculated on credit card transactions, there needs to be some amount of data about how your finances are faring. If you don’t have that then a merchant cash advance may not be the best thing for you. Six months is the typical amount needed, so even new businesses can apply. This still compares favourably with high street lenders, who will have much stricter demands of your experience in the working environment.

-You must be able to accept credit card payments:

The technology that powers a merchant cash advance is centred around your credit card transactions. This includes payments made in store, online or both in the case of some businesses. However, if your enterprise deals mainly in cash or cheque transactions, you may find a merchant cash advance is unsuitable for your needs.