Running a business can be an exciting venture, but there will be times that you need to pursue additional financing options. You’ve probably considered a small business loan, but have you thought about applying for a merchant cash advance (mca)? If your business receives most of its payments through credit cards, you could qualify for this financing product. With a merchant cash advance, you receive a lump sum, and remit a percentage of your future credit card sales to fulfill your obligation.
As you likely know, some industries accept credit card payments more frequently than others. Some businesses don’t accept credit cards at all. In this post, we will detail the benefits of a merchant cash advance, and the industries that typically utilize this product.
Which Industries Use Merchant Cash Advances?
1. Restaurants
Restaurants can have significant ups and downs when it comes to cash flow. Due to this, many restaurant owners pursue merchant cash advances. Since most restaurants accept credit card payments, this product is a great fit. It coincides with the pace of a restaurant’s sales, so they aren’t remitting an amount that they can’t afford.
There are many ways that restaurants can utilize merchant cash advances. If you want to generate more sales and reach new customers, consider investing in a food truck. More than 2.5 billion people grab meals from food trucks each day, making it a popular trend for restaurants to pursue. Using your merchant funding, you can pay for your food truck, and the extra inventory and staffing needed to operate it.
Other growth opportunities that you can pursue with restaurant merchant funding include opening a catering business, offering delivery services and opening another restaurant location. Still, many restaurants utilize their cash advances for other needs outside of expansion. Some opt to use their business financing for purchasing inventory, meeting payroll, and paying rent.
2. Retail Stores
Like restaurants, retail stores can experience volatile business trends. If you own a retail business that occasionally experiences a lull in sales, having added finances could help you ensure that your retail store remains operational. Since many customers pay for items with their credit cards, a merchant cash advance could be a viable option.
With merchant funding, your retail store can invest in inventory that customers appreciate. In the past, you might not have been able to afford reordering items that sold out. Once you receive a cash advance, you can comfortably restock inventory, and in-turn make more sales.
In addition to paying for inventory, you could use your retail cash advance to hire additional retail employees. This can be especially valuable during busy times, such as the holiday season.
3. Salons
When patrons visit your salon for manicures, massages, and other types of pampering, they likely pay via credit card. Due to the volume of these credit card payments, you could qualify for a merchant cash advance!
Using merchant funding, you can update your salon equipment, hire additional technicians, or pay for new marketing materials. Having loyal customers is pivotal to the success of your salon, so try to use your merchant cash advance in ways that will lead to customer satisfaction. Of course, like the other industries mentioned, salon business owners can use their merchant cash advance to afford consistent costs such as rent, inventory, and payroll.
4. Auto Repair Shops
When pursuing traditional financing from a bank, collateral can be a requirement. This makes repaying debt risky for small business owners in the auto repair industry. If you’re unable to repay your debt, the bank could confiscate machinery, equipment, and other expensive components that are needed to conduct business.
To avoid this, apply for a merchant cash advance. Most likely, your clients pay for repairs with their credit cards, so you’ll be able to remit a percentage of these sales until you satisfy your obligation, eliminating the fear of not being able to meet a strict payment schedule.
After you receive merchant funding, you can purchase new equipment, pay for marketing efforts, or expand your business location. Auto repair shops that have additional working capital available can provide elevated services, so don’t fall behind your competitors!
Is a Merchant Cash Advance Right for Your Business?
Having a merchant cash advance can help you improve your business. If your business falls under one of the industries mentioned in this post, you might qualify for this financing product. In addition, there are other businesses that accept credit cards, that could also benefit from a merchant cash advance.
If your business has had success after receiving merchant funding, tell us about your experience in the comment section below!
Editor’s Note: This post was updated for accuracy and comprehensiveness in March 2019.
Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.
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Post by: Fora Financial
Fora Financial is a working capital provider to small business owners nationwide. In addition, the Fora Financial team provides educational information to the small business community through their blog, which covers topics such as business financing, marketing, technology, and much more. If you’d like to see a topic covered on the Fora Financial blog, or want to submit a guest post, please email us at marketing@forafinancial.com.