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Merchant cash advances give you a lump sum of money for your business needs. The money is repaid by taking a percentage of your debit and credit card sales. Cash advances are an easy way to get fast funding with payments that fluctuate based on sales.
There are a lot of myths about merchant cash advances that might make you hesitate to apply. Let’s take a look at five of the most common misconceptions about merchant cash advances and why a cash advance could be a good option for your business.
Myth 1: Merchant Cash Advances Are Only for Struggling Businesses
A lot of business owners think cash advances are only good for businesses that are on the edge of bankruptcy. However, it’s much more common for a thriving business to use a cash advance.
Flourishing businesses need working capital to keep making improvements and increasing revenue. A merchant cash advance gives your business the fast funding you need to introduce new products, marketing campaigns, or hire more employees to meet increased demand.
Myth 2: A Cash Advance is the Same as a Loan
Traditional business loans and merchant cash advances both help your business get working capital. The differences come in the application and repayment process for loans versus merchant cash advances.
Loans generally have a more rigorous application process and take longer to get approved than a cash advance. You’ll also have a fixed repayment schedule. This means you’ll make monthly payments which include interest charges. Loans are best for businesses that need longer-term financing and a set payment schedule.
Merchant cash advances, on the other hand, usually take less time to apply and receive funding. You’ll get a lump sum of money based on your average credit and debit card sales. Unlike a traditional term loan, cash advance payments are based on sales volume. This makes a cash advance a more flexible funding option.
A cash advance can be a great option if your business has regular slow periods. For example, a restaurant in a summer resort town sees lower sales volume in the winter. With a merchant cash advance, this restaurant’s payments are tied to current sales instead of requiring a fixed monthly payment.
Myth 3: You Need a High Credit Score for a Cash Advance
Many traditional business loan lenders require a high credit score to get a business loan. This can make it hard for business owners to get the funding they need, even though your credit isn’t tied to the success of your business.
One of the best things about a cash advance is that it’s based on your credit and debit card sales volume. This means you don’t need a certain credit score to apply or get approved. If you’re a business owner with less-than-perfect personal credit, you can still get funding through a merchant cash advance.
Myth 4: Funding Takes as Long as a Traditional Loan
Merchant cash advances are all about getting your business the funds it needs — fast. Lenders like Zinch make the application and approval process for cash advances quick and easy. Zinch approves cash advance applications within 24 hours and can fund your advance in 2-3 days.
Myth 5: Cash Advance Interest Rates are Sky-High
Cash advances don’t have fixed payments with a traditional interest rate. Instead, your lender will take a percentage of your daily credit and debit card sales. This percentage is determined by your lender. They’ll look into factors like average daily sales and projected income when setting your rate.
Cash advance APR rates are higher than loans, but advances come with much more flexibility than a traditional business loan. Part of this flexibility is fluctuating payments based on your sales. If for some reason you have a low sales day, you won’t have to worry about making a fixed, high-interest payment. Instead, your payment is calculated using your set rate, so lower sales mean a lower payment.
Should You Get a Merchant Cash Advance?
Merchant cash advances provide fast, short-term funding for your business. You know your business best, so it’s up to you to decide what financing fits you best. Knowing the truth behind common cash advance myths will help you make more informed choices when deciding if a merchant cash advance is right for your business.
Contact us at (714) 500-6622 to learn more about your options. You could qualify for up to $250,000 in just 24 hours.
