Financial problems are commonplace for businesses in all industries. Whether you’re an established company with a loyal following or a niche business trying to get started, you can expect all kinds of setbacks to occur down the line. Though it can be difficult to navigate these challenges, it can be comforting to know there are a number of solutions available. A merchant cash advance is an excellent alternative financing service to explore when you run into trouble. Review these points and learn more about what this option can offer your company.

The Basics of an Advance

An advance is far from a new concept in the world of financing. Though similar to a loan, an advance is given to a person who can prove he or she will receive the money at a specific point down the line. With an MCA, the advance is made based around projected credit card sales. The business owner will provide credit transaction data to the lender and will be given an advance based on predicted earnings. The borrower then pays the funds back at a specified time down the line with the funds made through credit transactions. 

The Immediate Benefits

Using a service like a merchant cash advance can produce a handful of immediate benefits. For one, it provides direct access to funds at a time when a business might be struggling. What’s more, the repayment of the funds can be easier to manage than with a traditional loan. The advance is based around the earnings of a company. This means that payments are taken right from these future sales. Having access to capital during a difficult time can make a world of difference for a business dealing with major setbacks.

The Drawbacks

While there are plenty of advantages to using an MCA for your business, you should also remain mindful of the drawbacks. The major issue is that your slow period might last longer than you anticipate. If you’re expected to make repayment based on your average credit earnings and see smaller sales than usual, you will have to figure out a way to make these payments without falling behind. The secret to success is sitting down in advance and coming up with a plan for how you will make payments in the event your credit sales don’t meet standards.

Plenty of business owners use services like a merchant cash advance when experiencing a slow period of sales. Take time to review the ins and outs of this service to gain more perspective on how it might be useful for your company’s future.