Cash flow, or more specifically lack of it, is a constant enemy of the small business. You can budget for all anticipated expenses, but sometimes, a key client may not have paid or you went through an unusually slow month causing a shortage in funds to meet a certain cost. Maybe that food truck desperately needs a fresh coat of paint, or possibly the sales rep of an equipment supplier calls and says they have a limited time deal on a key piece of machinery. Where will the cash come from to buy these things? What if your business has an emergency situation and you need immediate cash to cover it?

Traditionally, a business would rely on a bank loan or a revolving line of credit to meet these short-term cash needs, but the process of securing these funds may take longer than you can wait. Also, depending on your situation, the interest rate may not be manageable, or the loan may not even be approved at all if you haven’t been in business very long.

If your business has a merchant agreement to process credit cards, you have an option available that can get you the cash you need quickly, and without the hassle a traditional bank loan would entail.

What is a merchant cash advance?

It is a lump-sum amount provided to small business owners in exchange for a daily percentage of credit/debit card sales. The amount you can be advanced, the percentage required to repay the principal, and the time you have to do it, is dependant on a number of factors including your average daily sales. Let’s say your business needs an advance of $10,000, the MCA provider will review your credit card sales history and make an offer that includes the percentage of the daily credit card revenue necessary to be paid and how long it will take to repay the advance. This will add up to more than the principle and allows the provider to earns their fees.

If your small business has a need for cash, here are some things to keep in mind:

●     Get the best rate – Merchant cash advances are not loans, but you can request the provider send you a projected annual percentage rate so you can compare the advance to a bank loan.

●     Understand the terms of the advance – Some agreements take a percentage of your daily receipts, other agreements take a flat amount regardless of your sales. The difference is significant. Remember that 10% is not comparable to an interest rate available through other options.

●     Is the provider reputable? – The provider will have access to your financial information, as well as potentially confidential business financial information, like your net sales and expenses. It’s a smart move to make sure that you are doing business with a credible provider. A good indication of a reputable company is their ability to offer you other financial services.

If your business needs an immediate cash advance, SyncCommerce can help you determine if a merchant cash advance is right for you. Call us today and speak with one of our financial professionals about merchant cash advances – we may have the perfect solution you are seeking.