A merchant cash advance can be a great, low-risk way for businesses to access funding. It also has many benefits over a traditional bank loan. But what exactly is a merchant cash advance, what are the benefits, and who can apply for one? Here we’ll explain everything you need to know…
What is a merchant cash advance?
A merchant cash advance is a type of business financing. Merchant cash advances are ideal for businesses that accept debit and credit card payments/use a PDQ machine.
The lender will provide the business with a cash advance which is then repaid as a percentage of its customers’ card payments using a card terminal (PDQ). The beauty of this is that the advance is repaid in line with sales. Your business only pays back the advance when it receives customer card payments, which helps to manage cash flow.
The cash advance can be used for a variety of things, including operating costs, marketing, website development, renovation, expansions, equipment, inventory, or training.
How do cash advances work?
Merchant cash advances are an easy, low-risk method to get short-term capital for your business. As soon as the lender approves your application for a cash advance (at a fixed amount), you can access the cash. Decisions are often made quickly (within 24 hours), making this an ideal funding option for businesses that require capital quickly.
This amount is then repaid with a percentage of your debit and credit card sales, via your card terminal. The cash advance provider will deduct a daily or weekly percentage of debit and credit card sales until the amount is repaid in full. This amount tends to be around 10% of the sale.
Due to the nature of the repayments, merchant cash advances don’t have typical repayment terms. The repayment timeline is based on sales, which means repayment terms can take anywhere from three to 18 months. The more sales you put through your card terminal (and the higher the amounts), the faster you will repay your cash advance.
What are the benefits of a merchant cash advance?
There are plenty of advantages to a merchant cash advance. Firstly, when compared to a traditional bank loan, a cash advance is much faster to access. The speed with which merchant cash advances are generally approved is a key benefit for many businesses.
Another major benefit of a merchant cash advance is that your repayments are all based on revenue, and repayment is only made in line with sales. As well as being great for cash flow, this means that there is less risk of you defaulting on your loan.
Also, in comparison to a bank loan, you won’t be asked to present a business plan. Instead, your provider will take into account your sales history. You will also not be asked for collateral against your advance, making this a low-risk option. Credit ratings are also not usually taken into account.
Who is eligible for a cash advance?
If you’re a business that receives payments via a card terminal, you’ll be able to apply for a merchant cash advance.
The great thing about merchant cash advance is you don’t have to own valuable assets to be eligible. Instead, your lender will have transparency into what your business makes in an average month. They will then agree your business loan amount based on this.
How can PMD help you secure a merchant cash advance?
When it comes to merchant cash advance, PMD has an unrivalled range of solutions, specialists, and access to all the major MCA lenders. PMD will take the hard work out of securing merchant cash advance for your business. We’ll liaise with lenders on your behalf, leaving you free to focus on running your business.
If you’re considering using merchant cash advance to raise funds quickly, get in touch today to see how PMD can help. We can provide all the business finance advice and guidance you need, as well as ensuring a streamlined, stress-free process.