For any business to run smoothly, there must be constant cash flow. This cash is of the essence in maintaining stock, expanding the business, and paying debtors among other purposes. In some instances, obtaining credit from commercial banks may be hard due to reasons such as the size of the business or lack of security. However, this should not worry you. With a merchant cash advance, you can easily get an advance with ease.
What is merchant cash advance (MCA)
This is a source of credit for small and medium businesses, which lack collateral to secure a loan. However, large enterprises can also rely on this funding. This form of business financing operates on the basis that after an agreement you receive the agreed advance amount. On the other hand, your MCA provider will deduct a portion of the income based on the receipts you have every month until the amount is fully paid. This article will highlight some of the main advantages of cash advance in business financing.
No collateral or credit is required
If you wish to have an excellent credit rating among your competitors, then you should think of merchant cash advance. This type of financing resembles a sales transaction, and therefore it will never reflect in the credit reports. Thus, the market can never know of your credit levels. Also, with this type of business financing, at no particular point will you lose your collateral due to payment default.
Less bureaucratic procedures
Unlike commercial bank loans where you would take, a lot of time to apply and receive a loan this is not the case for a cash advance. This limitation may paralyze business operations. In MCA funding, once you have filled the application form, you are certain of getting money on short notice. This implies that your routine activities will go on as planned.
Merchants rate firms based on their stability. The amount of money advanced to a business is solely influenced by the average of total revenue within the previous year. This is contrary to other forms of business funding. The later use credit reports for evaluation of credit worthiness of the firm. Thus, other forms of financing a business, rate credit financed business as a poor performer. This implies that a business can receive a small amount of loan as opposed to what cash advance merchants offer.
Revenue- based collections
Many businesses will pay a fixed amount of money at the end of the agreed period. In some cases, this may not be possible, as the business might be not be able to make these payments. However, this depends on how a merchant cash advance works in canada. In MCA funding, a business will only pay after receiving income.