Bank loan is not the only option when you need to fund your small business. In fact it could be quite difficult to get one if you are still a newbie and do not have a great credit score. Merchant cash advance could be the best option in such a case. Not only is it available quickly, it is also very easy to qualify for.
There are many firms and private lenders that offer merchant cash advances all over the world. The competition here has been getting so tough that lenders themselves have started getting in touch with prospective borrowers by purchasing merchant cash advance leads from lead generating firms. If you have been contacted by one such lender, it would be wiser for you to keep in mind, the below-mentioned dos and don’ts before you say that ‘Yes.’
Dos
Identify the urgency of your financial requirement
Although Merchant cash advance is a quick and easy option for most small businesses, it does come with its own costs that may make it too expensive. Therefore, it is very important to find out how urgent your financial requirement is. If it can wait for a couple of weeks you can look out for other options, compare the rates and then make your decision.
Prioritize your requirements
While going for a merchant cash advance, it is advisable to borrow only that much that you exactly need. Remember, this is an advance that you are taking against a considerable chunk of your future sales. So prioritize your needs, calculate the exact amount that you would need to cater to the most urgent needs and then apply for the advance.
Always look into the Repayment Plan
Paying back a merchant cash advance is very different from paying back a regular loan. A fixed percentage would be automatically deducted from every credit/debit card transaction of your daily sales and transferred to the account of the merchant cash advance provider. You will have to find out if this would be fine, given the kind of expenses you need to meet in your business. Also, you need to see if you will be able to repay the advance within the given time period.
Go through the contract carefully before signing it
The terms and rates of merchant cash advances might change from lender to lender. What might seem feasible to another borrower may not necessarily seem feasible to you. Hence, you need to pay special attention to the terms mentioned in the contract, especially the interest rate and the post-signing fees, before signing.
Don’ts
Don’t wait till the last moment to apply for a merchant cash advance
Although merchant cash advance is a quicker option compared to the other loans, the amount of time needed to get the funds in your account might vary from case to case. This depends on how fast you submit the documentation and how satisfied the provider is with the information that you have given. He may want to check a few references before approving your application and the technical setup will also need to be looked into. Therefore, it is wiser to apply as early as you can.
Don’t give wrong information about your business
Many borrowers tend to give wrong information about their business for the fear of being rejected due to their low credit score. They may state someone else as the owner of their business, only because they might be having excellent credit. Nevertheless, this is a wrong practice that can even put you behind the bars. As it is merchant cash advances do not work on the basis of credit scores. Therefore there is no need to lie. Also, make it a point to back everything that you reveal with proper documentation.
Don’t over shop
Yes, you may be contacted by many merchant cash advance providers who may buy your details through merchant cash advance leads. However, stop the temptation to over shop. You don’t want to spook the underwriter by making too many credit inquiries. They may feel that you are doing this as you were declined funds by the other providers. This might make it tougher for you to convince them to approve your application.
Merchant cash advance may be a good way to build your dream business as it provides the required funding well within time. These dos and don’ts may make it even easier for you to get approved.
