8 Questions to ask before taking out a merchant cash advance

8 Questions to ask before taking out a merchant cash advance

Many entrepreneurs and existing business owners think that merchant cash advance is the most convenient and option for securing a business loan. MCAs are convenient and enticing due to their simple application process, quick processing and speedy acquisition of funds. However before venturing out in search of much needed cash, ask yourself the following questions and ascertain the needs.

  1. Will the loan enable me to win more business?

More business will help your cash flow issues and ensure that your loans get paid back

  1. Will this make my business grow?

A merchant cash advance is given against future receivables so making sure that you invest in business growth. There is no sense in getting one if it does not contribute towards business growth so you can pay it off.

  1. Will I be able to acquire new equipment with this loan?

New equipment serves as assets that will eventually increase your operations.

  1. Is it the money needed right away?

Do not take out a merchant cash advance if you don’t need it quickly and let it remain underutilized

  1. Will the number of sales be enough to let the business run unaffected when the loan repayments get deducted from every credit card transaction?

Merchant credit card cash advance are paid back by using your businesses future accrued receivables, the best way to absorb these automatic deductions from profit is to increase sales to a high level and maintain it.

  1. Will the loan repayments affect my ability to pay other bills?

Merchant cash advances are usually paid back when your business is making profits, the amount paid back is relative to the amount of sales you generate.  A percentage or fixed amount of sales revenue will go towards repayments; this affects your ability to meet other expenditures such as bills and operational expenses.

  1. How long can I sustain this rate of repayment?

The business will have to remain profitable for the entire period of time required for repayment. Although the amount of repayment is directly dependent on your profit, your profits can fluctuate but they should not dip below your expenses.

  1. Is my credit card transaction volume high enough to sustain the repayment scheme?

The sales you make must be using credit cards as a mode of payment if you have taken out a merchant credit card cash advance, so you need to make sure your buyers use credit cards when purchasing your goods/services.

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