At some point throughout the course of its lifespan, every business owner will need capital for their business. Even with substantial savings on hand, many find that utilizing business funding options such as a merchant cash advance can help maintain expenses and daily production on a much more streamlined basis. So, what is a merchant cash advance? One of the most misunderstood forms of business capital resources, merchant cash advances enable business owners to secure working capital based on their revenue and not their personal credit history.
As a merchant, you have more options than you think when it comes to business funding. Essentially you are able to apply for traditional business loans, credit cards, business credit lines, and becoming more popular are merchant cash advances. Small business owners are more likely to get approved for revenue-based funding products over traditional loans. Let the Empower Lend team walk you through the ins and outs of the merchant cash advance world to see if it’s a right fit for your business needs.
Just because you own a business, doesn’t quite mean that you will automatically qualify for business funding. Almost a catch twenty-two, traditional lenders are willing to lend to small businesses but only if they meet expectations that some may only achieve after being seasoned for years in operation! How is that fair?
Merchant cash advances involve lenders providing immediate capital to a business in exchange for a part of the merchant’s future revenue. More commonly known as MCA Loans, this revenue-based funding has customized repayment terms that differ from traditional bank loans. Whether done through automatic ACH transfers or direct debits from future receivables, many merchants opt to maintain daily repayment options for their merchant cash advance. This can be beneficial for smaller companies that do not utilize an accounting service to handle monthly transactions.
Of course, being able to access working capital within 48 hours doesn’t quite count towards a con either now does it?
Some merchants may see some drawbacks from this form of business funding. MCAs have a repayment structure that utilizes factors rather than interest rates, which may confuse some business owners. Since the term of merchant cash advance funding is typically within 4 to 24 months, lenders provide a structured formula that utilizes the factor rate to determine the repayment increments. This can be troubling for a business that is utilizing the capital to escape the financial woes rather than manage them.
Calculating Your Available Merchant Cash Advance Options
On average, Empower Lend generally funds between $25,000 – $375,000 per business, usually allocated towards expansion and/or equipment purchasing. While our Business Funding Coaches will walk you through a customized funding calculation, getting some basic calculation tips can’t hurt, right?
Since merchant cash advance funding is revenue-based, it is highly recommended to apply for funding within your monthly revenue budget. For example, if your business is consistently generating between $30,000-$45,000 per month in revenue, you wouldn’t request $1M in funding, would you?
In addition to merchant cash advances, there are plenty of alternative business funding options that you could take advantage of for working capital. SBA loans have become more lenient with eligibility and industry restrictions in recent years. While SBA loans require a business to be operational for more than 2 years in order to apply, this type of funding can be quite comforting to those looking for a monthly payment.
Term loans are also available for business owners looking to handle time-sensitive expenses. Also referred to as short-term loans or long-term loans, this type of business funding makes capital available within 24-48 hours on structured terms between 2-11 months. This can help businesses purchase equipment, finance payroll or take advantage of bulk inventory stocking when needed without having to commit to traditional bank terms.
Invoice factor funding is a current trend that has been cycling through the business world this year. Since made trade industries operate on a Net30-45 basis, taking advantage of working capital that is secured against your open invoices can help you maintain daily operations and payroll while invoices are processed internally.
Learn more about merchant cash advances and small business funding opportunities by visiting the Empower Lend Services Page!