How Can You Use Your Merchant Cash Advance? (However You Want)
On September 29, 2009, we posted a blog titled “Using Your Business Cash Advance.” This post offered various possible ways that a merchant could use the business cash (up to $500,000) obtained through a merchant cash advance. However, as you may already be aware of, there are no restrictions on how merchants can use their advances. Therefore, renovation, expansion and advertising are not the only feasible uses of a merchant cash advance.
Explore New Markets
If you’ve been selling the same products to the same people, year after year after year, it might be time for a break from the monotony. Consider exploring new markets.
Do the research and find out which audiences that you are not currently reaching, may be able to benefit from your products and/or services. Once you’ve done the research, a merchant cash advance can finance the promotions, advertisements and marketing to your new target audience. You may be able to increase your customer base by adding a demographic or two.
Introduce a New Product or Service
Introducing a new product or service to your business could bring in new customers and/or entice existing customers to make additional purchases. Look into competing businesses and see what types of products and services they offer. Use your merchant cash advance to go above and beyond your competition, offering your customers a wider selection, or improving on the products and services that you already provide.
Working Capital
If your business’s sales are low and you simply need a little extra cash to keep your business above water, a merchant cash advance can be the perfect remedy. Working capital is extremely important for any business, so having access to working capital when you need it is key.
As mentioned, these are only a few suggestions on how you can use your merchant cash advance. In the end, the decision is completely up to you.
*If you got a merchant cash advance of $30,000 or more, how would you use it?
Frugality at its Best
“He’s not just frugal. He’s frickin’-frugal.” – Rose Nylund, Golden Girls
The above is one of the many funny quotes from the 1980s sitcom, Golden Girls. It’s used in a light-hearted manner, to simultaneously poke fun at Rose’s Scandinavian background and her boyfriend Miles’ penny-pinching tendencies, but it also brings up the point that frugality is often viewed in a harsh light.
The word frugal can conjure up images of a tight-wad or a cheapskate who wants to spend as little money as possible, often resulting in the purchase of sub-par products and/or services. But in reality, as a business owner, being frugal is a valuable characteristic.
Frugality does not just consist of spending the least amount of money whenever possible. A savvy business owner has an ultimate goal of producing the greatest profit possible, and sometimes that might initially take more money, but will allow for a greater profit in the end.
Getting a business loan through a bank is usually a business owner’s first choice for business financing. And in a perfect world, a small business owner would walk into the bank with a smile and a request, and walk out with a check for the exact amount of money she needs for her small business. But snap back into reality, and you’ll realize that many small business owners simply do not qualify for a small business loan, and as banks have tightened their lending practices, landing a business loan through a bank has only become more and more difficult.
Some small business owners shy away from merchant cash advances in attempt to save money, without looking at the bigger picture. So consider the following question. Who would you rather be; the business owner who didn’t qualify for a bank loan, and chose to not get any financing for his business, saw no growth and eventually had to close his business due to a lack of financing, or the business owner who sought a merchant cash advance, a less-traditional method of business financing, but made it work for her business and saw growth and expansion as a result? The decision is up to you.
*Are you a frugal business owner? Use the following links to find ways to save money on all aspects of your business, without settling for less.
Top 10 Frugal Ways to Market Your Small Business
A Date with a Business Loan
Searching for business funding is a lot like dating. You search and search until you find the perfect fit and then…you commit. The art of dating, however, has grown technologically, with online services such as eHarmony and Match.com making finding a relationship a little bit easier than searching for business funds.
Though there may not be many services that allow small business owners to state exactly what they’re looking for in a business funding method, in order to be paired up with the ones that suit them best, it is almost guaranteed that small business owners who refuse to open their eyes to the multitude of business funding methods and continue to pursue the same one or two traditional methods that keep failing them, will never be satisfied.
Startup consultant Martin Zwilling said it best in an article for Forbes. “I’ve found that entrepreneurs tend to fixate on one or two funding sources–often to their detriment. Better to keep all options on the table.”
Sifting through the throng of available business funding methods and finding the ones (or one) that offer everything that you are looking for may be a painstaking task. But just like the overwhelming feelings of satisfaction, relief and zeal for the future that a groom feels as he views his bride for the first time, the hard work that goes into your search for an appropriate business funding method will be well worth it once you’ve found “the one.”
That said, don’t close your eyes to alternative funding methods such as the business cash advance, you could keeping your business from finding the funding of its dreams.
Why MRI?
You may already know that the merchant cash advance is a great option for your business as some key benefits of the merchant cash advance include:
- Minimal requirements
- Fast funding
- Flexible repayments
- Fast approval
However, there are also many reasons why small business owners should choose Merchant Resources International for their merchant cash advances, which include:
- High approval rate
- Automatic renewal eligibility
- Various funding programs
- Better Business Bureau support
Find out more about what makes MRI better than the completion and get a free online quote at www.cashprior.com.
The Small Business Loan Alternative
The merchant cash advance is called the small business loan alternative because it offers another option to small business owners who do not qualify for traditional business loans offered by banks and those who simply choose not to go the bank route.
Use the following chart to gain a better understanding of the key differences and similarities between the merchant cash advance and the traditional bank loan.
CHARACTERISTICS |
MERCHANT CASH ADVANCE |
TRADITIONAL BANK LOAN |
Two Week Process |
Yes | No |
Inexpensive |
No | Yes |
Suitable for Non-Merchants |
No | Yes |
Unsecured |
Yes | No |
Less-Than-Perfect Credit Ok |
Yes | No |
Flexible Repayments |
Yes | No |
Easy Renewals |
Yes | No |
Up to $500,000 in funds |
Yes | Yes |
No Restrictions |
Yes | No |
Suitable Method of Business Financing |
Yes | Yes |
Minimal Requirements |
Yes | No |
Merchant Cash Advance: A Glossary of Terms
If you’re a small business owner who’s looking into receiving a merchant cash advance for the first time, you may hear some words, phrases and/or terms that you’ve never heard before. Use this glossary to build up your merchant cash advance vocabulary before searching for a business cash advance, or refer back to this glossary should you every come across a new term, during your merchant cash advance search.
Click on the terms below to view their definitions.
Alternative Financing Becomes Popular
Bank loans have been particularly hard to come by since the beginning of the recession. In the thick of the “Great Recession” alternative business funding methods became very popular as small business owners were forced to look into other business financing options. But now, even though the economy has begun to improve, alternative funding methods are still very popular, as bank lending has yet to bounce back and many business publications are educating their readers on alternatives to the traditional business loan.
Today, the Wall Street Journal features an article focusing on asset-based lending. “Because asset-based lenders focus on collateral, rather than credit-worthiness, they do deals that more traditional lenders shy away from. Borrowers put up equipment, inventory, accounts-receivable and other liquid assets in exchange for the money,” wrote Kyle Stock. Stock also explains that these lenders have the legal right to seize assets, should the borrower miss payments.
An article in the New York Times last week, addresses a business funding method called purchase-order financing. With this method, the lender pays a factory to manufacture goods and pays for the goods to be shipped. After the lender is paid for the merchandise and his services, he then hands over the rest of the money to the customer (the business that borrowed the money).
The merchant cash advance of course, is another alternative business funding method. Small business owners can get up to $500,000 for their businesses through this method. However, unlike asset-based lending, the merchant cash advance is unsecured, and merchant cash advance providers will not seize borrowers’ property if their sales are slow. Also, instead of taking the money for purchases from a business and then allocating it back to the business, minus the borrowed amount and service fees, merchant cash advance providers only take a small percentage of a borrower’s daily credit card sales, allowing them to receive the revenue from their customers’ purchases as they are made.
A Sneak Peak into the Merchant Cash Advance Guide
As promised, Merchant Resources International has released the Merchant Cash Advance Guide. The guide, which can be downloaded here, offers advice on expediting your merchant cash advance approval and funding, tips on making the merchant cash advance work for the benefit of your business and links to various articles and blog posts offering expert advice on the merchant cash advance.
Now, small business owners no longer have to be wary about receiving a merchant cash advance, because everything they need to know about the alternative funding method is in this guide. Of course, should a merchant still have unanswered questions about the merchant cash advance, one of MRI’s funding specialists will be happy to offer assistance.
What’s Inside?
Chapters
- Fundamentals
- Tips
- Useful Resources
Topics
- Basic Requirements
- Programs
- Renewals
- Applying for a Merchant Cash Advance
- Asking Questions
- Deflecting the Cost of a Merchant Cash Advance
- Merchant Cash Advance vs. Bank Loans
- An Overview of Benefits
- Other Terms
- Glossary
- Links
- Company Information
Bonus
*Illustrative charts comparing and contrasting the merchant cash advance with the traditional business loan and depicting the unique, flexible repayment method employed by merchant cash advance providers.
*Merchant Cash Advance Q&A
Be sure to refer to the The Merchant Cash Advance Guide for all of your merchant cash advance questions.
Why the Merchant Cash Advance is Important
February’s Issue of Entrepreneur magazine features an editor’s note from Entrepreneur Editor-in-Chief, Amy C. Cosper.
In her note, Cosper explains the importance of credit for small business owners and the havoc that can be created when that credit is denied and/or revoked.
The note includes some astonishing statistics.
- 38 percent of small businesses reported a decrease in lines of credit (National Small Business Association)
- 40 percent of small business owners who requested extensions to their lines were denied (National Federation of Independent Business)
One sentence, however, stood out from the rest, illustrating the extreme importance of an alternative to traditional business funding methods. “Across the country, [entrepreneurs] have been left scrambling to find emergency operating capital in a market where credit is damn hard to come by,” wrote Cosper.
Many small business owners have been able to find solace in a merchant cash advance. Even when their banks have refused to extend lines of credit, they have been able to receive up to $500,000 in business cash through merchant cash advance lenders who advance funds based on monthly credit card sales.
The problem is too many small business owners are either unaware or wary of this business funding method as it is relatively new in comparison to bank loans and lines of credit.
Instead of completely writing off the business cash advance as a prospective business funding method, it is important that small business owners take the time out to understand exactly what they can gain from taking advantage of a business cash advance. It can make a world of difference in their businesses.
New Plan to Increase Bank Lending: Will it Work?
The Small Business Administration is set to put a new plan in action, in attempt to boost bank lending to small businesses.
Through this plan, the SBA will guarantee up to $3 billion in pools of banks’ 504 loans sold into the secondary market, according to Business Week. This is in an effort to relieve banks’ fears of borrower defaults.
The 504 loan program is designed for small business owners who want to acquire real estate or equipment for expansion or modernization. Therefore, it is hoped that focusing on this program will allow small business owners to expand their businesses and create more jobs. Still, there are a couple of setbacks and concerns regarding the plan, according to the Business Week article, making it necessary for small business owners to continue to keep an open mind to bank loan alternatives such as the merchant cash advance.
- Even an 80% guarantee may not be enough to lure lenders back.
- “…TALF’s [Term Asset-Backed Securities Loan Facility] expiration could slacken demand and reduce the premium lenders get for their SBA loans, which in turn means less incentive for banks to make the loans to businesses.
Expansion is one of the top uses of the merchant cash advance and with the opportunity to receive up to $500,000 in business funds, small business owners can choose to expand their businesses however they choose. Whether you want to open an additional location or increase the products and/or services that your business offers, you have an opportunity to create jobs and rebuild the economy with a merchant cash advance.
