Businesses with bad credit history might struggle to keep it viable. Generally, a small business that does not have a good credit score faces many difficulties in being eligible for a loan from conventional sources. Read on to figure out how the option of a merchant cash advance in a bad credit scenario can help your business to profit and grow.
Credit Scores: Impact on business
Bad credit usually indicates that you have had a history of failing to repay past credit obligations. If you apply for a loan through a conventional commercial lender, you may find it challenging to get an approval. An alternative financing method is a merchant cash advance (MCA). When looking for a merchant cash advance in a bad credit situation, all you need is a credit application and a few month’s merchants or bank statements. You can use the advance to sustain or expand your business, for working capital, payroll, purchases, for hiring employees, or relocating your business from one location to another. This flexibility will help you see your business in a whole new light, and it opens up opportunities that you may not have considered before.
Merchant Cash Advance: How Does it Work?
Merchant cash advance companies offer you a sum of cash up-front that can be used for any business purpose you choose. Businesses such as restaurants, retail shops, night clubs, garages, and other such businesses whose revenue comes from overall sales can use this facility to expand or sustain their business. Repayment can be made with a portion of your company’s forthcoming sales. Even if you have a less than perfect credit rating, it doesn’t matter as a merchant cash advance can actually help you repair your score. Look at it as an advance on the future sales of your business.
Repayment: Flexible Cost Structures
Merchant cash advance companies do not have a pre-determined end date for repayment as it is based on the retrieval rate, a percentage of each day’s sales. Repayments are structured in two ways. One method is the ACH (automated clearing house) withdrawals. Here you can remit a fixed amount of daily or weekly debits along with fees from your bank account until the advance is paid in full. How much you will pay in fees depends on your ability to repay the merchant cash advance. Merchant cash advance lenders will determine the factor rate based on its risk assessment. Another method is the percent of overall sales. The funders automatically deduct a set percentage of your overall sales until the agreed-upon amount is paid back in full. The higher your sales, the faster will be the repayment.
The good news is that flexible cost structures give you a lot of flexibility and don’t come with the in-built stress of dealing with a conventional financial institution that usually puts you through tons of paperwork and excessive delays. With a merchant cash advance, you can start planning for the future and take back control of your business in the best way possible.