What Is a Merchant Cash Advance?

Cash Advances Against Credit Card Income

Financing your merchant account basically involves agreeing to sign over a portion of its proceeds to the lender until the debt is fulfilled. The lending agreement sets two rates. The first, the annual interest rate, is the cost of capital to your business. The second is the percentage of the account’s earnings dedicated to repaying the cash advance. Since the payment swells with your income, many business owners use it immediately before a high demand period to load up inventory. It’s also great for renovations and redecoration when you need a seasonal appeal and only have a tight window for turning your decor.

Applying for a Merchant Cash Advance

Unlike traditional business loans for asset purchases or working capital, advances against a merchant account can be approved in just a few days. Each lending firm is slightly different, but the private lenders that commonly offer this product typically require a quick credit check, proof of income, and earnings statements going back between 90 days and a year. Since these advances are meant for working capital at a single location, they typically run up to $200,000. If you need to raise more capital, you can combine them with other forms of asset financing to maximize your cash on hand.

How Long Does It Take To Repay?

The merchant cash advance was designed as a short-term lending solution for companies that need to raise capital. It’s an alternative to more traditional working capital lending options like a business credit line, and it can be used alongside them when you really need to take advantage of a short-term opportunity. Most borrowers time the application to minimize the wait between investing in their businesses and seeing a demand spike, because that’s how it’s most cost effective.

Once you have some practice using this tool to get through your low cash flow periods, it gets easier to make use of it as a habit. Load up on inventory when demand is about to be in season, then let yourself coast down to your off-season operating costs and inventory levels. You won’t need to worry about dipping into reserves when it’s time to get ready for another season, because you can use a merchant cash advance to prep your business.


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