Merchant Cash Advance
by Gerri Detweiler
These are not loans, but, as the name indicates, are a business cash advance. The funding provider gets paid back by taking a portion of your future credit card sales each day. You can usually get approved in a day or two—with very little paperwork. But you’ll pay for this convenience in very high interest rates. Because this option is so expensive, it should only be used if you’re desperate or want to take advantage of short-term opportunity that requires fast cash. You don’t want to get in habit of relying on merchant cash advances since its higher cost can make it very difficult to manage future cash flow.
Nav is the ONLY source for both personal and business credit access. See advice on how to build your business credit, get funding and save money. Get Started For Free
What You Need to Know About Merchant Cash Advances
|Fast access to cash||Very, very expensive (70% – 200% APR)|
|Flexible repayment terms||Minimum daily payment hurts cash flow|
|Strong credit not required||Doesn’t help build business credit|
|You choose how to use||May lock-in merchant processor|
|No collateral required||Must accept credit cards|
Best Uses for Merchant Cash Advances:
- Temporary cash flow help
- Purchasing inventory at deep discount
- Unplanned expenses
- Paying other debts due
Proceed with caution! If you don’t qualify for other financing because of bad credit, merchant cash advances could help. But you should only be desperate or have a plan for how it will increase revenues more than the cost. This should strictly be a short-term solution. Make sure you calculate the true cost of the advance. The details can be tricky.
Merchant Cash Advance Offers
Instantly see your top options for business loans and credit cards based your business's needs using Nav's MatchFactor technology. See my match scores for free.