When looking for small business funding, business owners have a variety of options at their disposal. The first and most common option people think of are banks. Banks were invented to loan out money so it makes sense to look there first. However, there are so many more options in the year 2016. While many businesses go with the better-known financing option via a traditional bank loan, more and more borrowers are turning to merchant cash advances.
A merchant cash advance is essentially the same thing as a loan but with a few twists. Water Street Capital is a great example of such a business and offers some of the best tips on the merchant cash advance business. Although it is usually much easier to apply, there are still a few general tips that are good to know before starting the process.
- Minimum Requirements
Before any business owner even thinks of applying for a merchant cash, he/she should be aware of the minimum requirements for getting approved. The most important rule is that no startups are approved. Merchant cash advance business are like investors. There has to be evidence of an already successful business that generates at least $10,000 in gross sales per month. This ensures that the lender will be repaid rather than basing it on a credit score.
- Applying Online
If the business meets the $10,000 minimum, they can easily apply online. As stated earlier, no excellent credit history is necessary. The application usually is approved and the borrow can receive the money in as little as 3 business days! While amounts vary with the lenders, Water Street Capital can lend out up to $500,000 if the small business meets the criteria.
- Uses of a Merchant Cash Advance
A merchant cash advance is much more flexible than a traditional loan and can be used on a number of things. Some business owners use it to add new employees to the payroll until business speeds up again. There have been business owners that used the money to advertise on billboards or television. Some simply use the loan to get caught up with bills during a slow period.
- Repayment method
Even if the business is experiencing a slow period, that is okay! With a traditional bank loan, the payments are fixed at a certain amount for each month, yet with a merchant cash advance the rate actually fluctuates. That might sound scary, but it shouldn’t; the payment varies depending on how well the business does during that certain month. A small percentage is retracted from the business’ sales each month and automatically applied to the outstanding balance. If the sales are down for some reason, the owner simply pays back a smaller amount. During high times, however, more money is applied to the account and it is paid off faster than expected. Either way, the business owner has much less risk of not being able to repay.
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