What Are The Benefits Of A Merchant Cash Advance For Use As Working Capital For Your Business?

benefits merchant cash advance working capital business

The Merchant cash advances industry is growing tremendously because some traditional banks are not meeting all the needs presented on the table by some small businesses. They are exceptional and can be a great alternative to conventional and short term business loans that are much more complex in getting an approval. It may seem complex and arcane but it’s fast, simple and easy for those in need. This can be an open door to the financial world of retailers. 

An interested merchant is given a lump sum merchant advance up front by a cash advance provider and in exchange, merchants make an agreement to pay back the principal amount and the fee by giving the company a valid credit card sales percentage until it reaches a zero balance. It ranges around 12-24% and a payback time frame of around 5-12 months. It is important for merchants to use the providers credit card processor because the advancement is paid back automatically as a percentage of every batch’s proceeds and most companies don’t find it necessary for them to change their credit card processors. 

Why Merchants Like These Short Term Business Loans? 

The cash is quickly processed and available as compared to traditional loans because some businesses like restaurants rarely get traditional funding and need immediate liquidity. Most providers advertise that the money can be easily accessed within 203 working days. Unlike a loan that is dependent on an interest rate , with cash advances you know the exact amount you will repay back in advance normally over a 3 -12 month period. These loans are unsecured and you do not risk losing any of your assets. 

How Cash Providers Benefit 

Most financial charges vary widely from one provider to another and also from one advance to another. The effective rate of interest varies depending on the monthly bank deposits that the business generates hence there is no one fixed interest rate. The provider may collect the money sooner if the merchant business does well when sales are up and at a higher rate, and because there are no limitations on loan payment, the annual rate may decrease as the payments are extended over time. In some cases, the provider generally forecasts a debatable short period for payback which can be less than a year. 

High Risk For Lenders 

There is a fairly high risk to cash advance providers hence the payback amount can be quite high. They use an integrated model to analyze the future and the likely credit card purchases and also mitigate the risk by offering money with relatively short payback periods. In some cases, cash providers accept new merchants without going through their credit card transactions history and also giving a larger amount than the merchant’s expectations of earning from the credit card annually. Cash advance providers take all the risks that are dependent on the projected future sales , makes it a risk worth taking. 

Many businesses are not able to be approved by most traditional funding companies for a short-term business loan, so these merchant advance loans can be quite helpful when in urgent need of working capital.. Many times healthy small business owners could use some extra money to expand their businesses but they cannot get the traditional funding necessary. This makes the cash advance industry very helpful to the interested merchants.


I hope you enjoyed this blog post about what the major benefits of merchant cash advance are for working capital in business.

Interested in more articles about the cash advances and loans?

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