Starting with a new business venture brings along a lot of challenges related to equipment, recruitment, finances, and much more. Among the other issues faced by new business owners, gathering funds is one of the crucial yet challenging ones. Even if your business has been running for quite some time and is in need of funds during the season off, it becomes unavoidable to apply for business loans. There are numerous types of lenders in the market offering loans like merchant cash advance loans and others as per your business requirements. Before discussing any further, learn more about merchant cash advance loans.
What is a merchant cash advance loan?
As the name implies, a merchant cash advance loan is an upfront cash advance given to the merchant by the lender. This cash is used by the merchant to address their temporary credit needs. The merchant cash advance loans make merchants eligible for lump sum cash advances that can be repaid with a portion of the daily debit or credit card transactions received by the associated business.
Once the deal between the lender and borrower is closed, the borrower or merchant needs to pay a predetermined percentage of the future card receipts. In these cases, the lender has all the bank account details of the merchant; thus, there is absolutely no need for collateral to secure the loan amount.
What are the prominent features of merchant cash advance loans?
Before opting for merchant cash advance loans, it is important to learn the following features including:
- The merchant cash advance loans allow business owners to withdraw a lump sum amount in order to fulfill their short-term financial needs.
- The hassle-free application process of these loans is quite simple, unlike the complicated traditional loan types. This feature attracts more customers towards it as it takes minimal time to get approved.
- The repayment tenure is one of the crucial aspects that bother borrowers usually. However, the merchant cash advance loans hold flexible repayment tenures as the merchant and lender agree on repayment tenure according to the monthly card statements of the business. Within the agreed period, the merchants are required to pay the entire advance in full.
- The merchants highly appreciate opting for merchant cash advance loans as they can get the loan amount quickly and address their urgent financial needs. This helps the merchants to maintain the cash flow of their business during a financial crisis or season off as the funds are immediately transferred to the merchant’s bank account.
- As discussed earlier, lenders do not demand for collateral for transferring the loan amount to the merchant’s bank account. They have the bank account details of the business owners and can easily avail the merchant cash advance scheme. Business owners highly appreciate this scheme, especially when they do not have adequate assets to offer to the lenders.
What are the eligibility criteria for availing merchant cash advance loans?
The terms of eligibility of merchant cash advance loans are pretty straightforward, including:
- The lenders who are going to offer upfront cash must be convinced by your business productivity and consistency. Thus the merchants should have a stable business and consistent cash flow in their bank account to be eligible for the loan amount.
- Every lender has different criteria for giving out cash advances. Depending on the terms and a minimum annual turnover of the business set by a particular lender, the merchants can qualify or get rejected for the desired loan.
- The business must be running for a significant amount of time and should have been accepting card payments for quite some time.
- The merchant should have a decent credit score which tells the lender that the borrower is a responsible buyer.
Get in touch with a reputable lender to explore your options regarding SBA small business loans!