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The Pros and Cons of a Merchant Cash Advance

A merchant cash advance offers an alternative form of financing for businesses. It’s a special type of loan that involves the use of credit card and debit card transactions. The lender will look at your business’s credit and debit card transactions to determine the amount of the merchant cash advance. The greater the value of these transactions, the more money you can borrow from the lender. What are the pros and cons of a merchant cash advance exactly?

The Pros and Cons of a Merchant Cash Advance

Pro: Easy to Obtain

If you’re struggling to get approved for a traditional business loan, you may want to apply for a merchant cash advance. Merchant cash advances are easier to obtain than traditional loans. Lenders won’t scrutinize your credit. As long as you have credit and debit card transactions, you can obtain a merchant cash advance.

Pro: No Fixed Payment Schedule

There’s no fixed payment schedule with a merchant cash advance. You can pay the lender more or less depending on your business’s transactions. The more credit and debit card transactions your business processes, the more revenue it will generate. And with higher revenue, you may want to pay back a larger portion of the merchant cash advance.

Pro: Doesn’t Require Collateral

You don’t have to provide the lender with collateral when obtaining a merchant cash advance. Merchant cash advances aren’t classified as secured debt financing. Rather, they are a form of unsecured debt financing.

Con: High Interest Rate

Lenders charge interest on merchant cash advances. When compared to traditional business loans — as well as other forms of debt financing — merchant cash advances have a high interest rate. You’ll have to pay more in interest fees when financing your business with a merchant cash advance.

Con: Dependent Upon Transactions

As previously mentioned, the amount of a merchant cash advance is dependent upon your business’s credit and debit transactions. The lender will look at these transactions to determine how much money to loan your business. Your business may experience a slow period in which it generates fewer transactions. As a result, the lender may offer you a lower amount for the merchant cash advance.

In Conclusion

There are other ways to finance your business besides a traditional business loan. If your business collects payments in the form of credit and debit card transactions, you can use a merchant cash advance.

This article was brought to you by Intrepid Private Capital Group, a Global Financial Services Company. For more information on startup and business funding, or to complete a funding application, please visit our website.

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Intrepid Private Capital Group • August 26, 2022


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