Operating a business is no easy task. If you run a business, then you are probably all too aware that there are times when your company needs additional funding. If you’re looking to expand, hire additional help, or update technology, a merchant cash advance may be the solution to your funding needs.

Understanding Merchant Cash Advances

A merchant cash advance focuses on borrowing an advanced amount of money based on your future sales from your customer credit or debit card purchases. If your business struggles to make a decent amount of funds every month, then a merchant cash advance is probably not for you. However, if you run a business that frequently uses credit cards, and has predictable sales, then a merchant cash advance could be perfect for what you need.

A lender will offer the advance calculated on your sales and in return, the lender expects a percentage of your profits. The application process is simpler than a traditional loan and the advance offers additional flexibility with payback. 

Making Sure You Need the Advance

As with any type of loan or financial advance, make sure you have a clear idea of what you need the funds for and where you’ll utilize them. You don’t want to waste the funds on something that wasn’t an immediate benefit to your business. 

Find out the exact cost you need for the improvement you’re seeking in your business. Whether it’s equipment repairs, store expansion, or bringing on seasonal help, calculate the cost so you can use the advance to your best advantage.

Payback Options for Your Advance

There are a few ways your business can pay back a merchant cash advance.

• The percentage owed can be automatically withdrawn via ACH.
• The credit card processing company can split funding and divide the funds between your business and the finance company.
• Sales can be deposited into a bank account where the finance company can hold onto their portion and send the remaining funds due to you, back to your business. 

Choosing the right payback method depends on your preference. Typically the least popular choice is the secure bank account controlled by the financing company, this is due to the funds taking longer in getting back into your business bank account. 

Merchant cash advances are a great tool for garnering funds if you utilize credit cards and have decent sales coming in. Remember to calculate your costs and decide if the advance is a real need and evaluate your payback options so you have an idea of how you’ll pay back the advance. With a little research and good understanding, a cash advance could be just what you need.