Myth Busters: The Truth about Merchant Cash Advances
Myth #1: Merchant Cash Advances Should Be an Eleventh Hour Move
While these types of advances can certainly help a struggling business that may not be able to secure a strict, traditional loan; that is not it’s most popular use. Successful businesses who want to get ahead often use merchant cash advances to buy new inventory, expand their business or implement some fresh marketing techniques. In most cases, it is the businesses that are looking to build that have the most success with a merchant cash advance.
Myth #2: Merchant Cash Advances Swindle Struggling Business
Merchant cash advances require no personal guarantees or collateral. Agreements are customized for every company that applies and the advances are made by purchasing a portion of future credit card sales. The profit for the lenders comes from the discounted rate at which the credit card sales were purchased. This means businesses do not have to worry about high interest rates or fixed amounts that come with traditional loans.
Myth #3: The Return Rate of a Merchant Cash Advance Can Leave Businesses Broke
Before anything takes place, a small business owner and his/her merchant cash advance provider agree upon a payback percentage that will work for both parties. It is important to note that merchant cash advance lenders are getting paid back from credit card sales. So, if a business has a slower month, their payment will be smaller. Merchant cash advances work with the pace of their client’s businesses.