Pros and Cons of Merchant cash advance: Is it worth it?

Pros

  • No credit score checks. The payments are secured by credit card sales. 
  • Straightforward and quick approval process. Other types of loans require applications and time-consuming paperwork.
  • Perfect for small business owners that aren’t required to prove their profitability. 
  • No collateral is required. 

Cons

  • Cash flow is interrupted because part of the funds goes straight into paying the debt. You need to make sure that your business can survive. When the withholding rate is 10%, you only get to keep 90% of your daily profit. Do your calculations to determine if your business can withstand this. 
  • High fees associated with obtaining a merchant cash advance. All the convenient conditions come with a hefty price. 
  • The factor rate will be added to the loan. Multiply the factor rate to the total sum of the merchant cash advance to know the final sum that you need to pay off. 

To sum it up, a merchant cash advance is a good option for small businesses that don’t have profitability proof to be eligible for other types of loans. 

Kristina

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