Companies often have trouble paying for what they need, yet profits should never slow down because of a cash flow shortage. You can prevent your venture from getting stuck by accessing a merchant cash advance. Here are some factors worth considering when taking advantage of this alternative form of financing.
Check Your Situation
Although they can do wonders, a merchant cash advance might not be the best option for you. They’re most effective for small- and medium-sized operations where customer activity is primarily credit card-based. Examples include restaurants, clothing stores, and auto repair shops. To qualify for an MCA, you need a solid record of customers charging their plastic.
Check Your Fine Print
Merchant cash advances are a style of financing that goes wholly unregulated. Although you have limitless choices in terms of repayment options and interest rates, you run the risk of a company taking advantage of you. Some outfits offering MCAs are less than trustworthy. Read every word of your contract before signing to avoid falling into a trap. If you have outstanding concerns, keep shopping.
Check Your Repayment Period
Payment schedules for MCAs can be short or long. Extensive ones go for as much as half a year, whereas brief ones last as little as a month. The period you want depends on how you intend to use the money. A one-time expense, such as a new piece of equipment, probably should be paid off quickly. Agree to longer repayment terms for larger projects, such as a storefront renovation.
Check Your Debts
Lenders wish to avoid working with customers who are unable to repay them. Having delinquencies on your record may cause them to reject you. Clear up any outstanding balances prior.
Check Your Paperwork
When moving forward with an application for an MCA, you need to provide plenty of documentation. Make copies of bank statements, receipts, and expense reports extending back several months. The good news is you won’t have to provide as much information as you would for a bank loan. That said, a mistake could delay your request from going through or even be terms for rejection. Have an extra set of eyes look over what you’re sending to verify everything’s kosher.
A merchant cash advance may be the best option for satisfying a financial hole in your operation’s budget. Accessing one of these loans, however, requires diligence and caution. Understand what working with one of these providers means before taking action.