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The merchant cash advance (MCA) is a blessing to many businesses. Merchants who had little chance of getting quick funding now have a reliable source to finance unexpected expenses and pay off impatient debtors.
However, this game-changing solution doesn’t have a solid reputation. Although an MCA can deliver a sinking ship, it typically comes at a price. In addition to large interests, the cash advances sector is plagued with harsh terms and hidden fees, which are often too much for a small enterprise.
As a merchant, therefore, you should be wary of the provider from whom get a cash advance. Remember, not all are out to take your hard-earned money. Below are a few tips to getting the cash advance that will help, rather than harm your business.
- The cost of borrowing
Among the primary concerns among potential borrowers are the huge interest rates that cash advances attract. If yours is a small business, an expensive advance can adversely affect your cash flow. It’s, therefore, advisable to take sufficient time to compare rates from many providers and choose one with a fair borrowing policy.
Moreover, there’s a growing fear that borrowing a MCA can expose an unsuspecting merchant to excessive payments, primarily resulting from hidden fees. Read and understand the terms and conditions fully before accepting any funds.
- Why you’re borrowing
Industry analysts depict that the reason cash advances are so harmful to small businesses is many entrepreneurs request funding for the wrong purposes.
Cash advances are easy to get, but the catch is that they’re often a short-term solution. For instance, it’s not wise to get a cash advance to expand your operation without accounting for long it’ll take the new premises to have a steady flow of customers.
To avoid getting stuck with an unpaid advance for months on end, only apply if you intend it to help you generate more income sooner rather than later so that finish paying back the provider as quickly as possible.
- What you’re getting
A cash advance is essentially a funding solution, but that hasn’t stopped providers from bundling up MCAs with additional benefits.
Many small-time merchants prefer cash advances to business loans because, in addition to being simple to acquire, independent providers provide reliable customer support and extra services. Firms like First American Merchant offer borrowers access to resources like free accounting services and money management advice.
When chosen wisely, a merchant cash advance provider can become a trusted business partner.
Despite the discouraging reputation, you shouldn’t fear to get a MCA if the need demands it. Instead, be smart enough to ensure you pick the provider that best suits your operation.