Why Merchant Cash Advances are More than a Plan B | Behalf
Why Merchant Cash Advances are More than a Plan B
Sometimes running a small business can feel like an uphill battle. Small businesses are especially vulnerable to slow seasons, working capital shortages, and gaps in cash flow. In anticipation for these sorts of events, most small business owners keep a capital reserve for rainy days. But is that enough? On average small businesses maintain cash reserves that stretch for about 27 days, while the recommended amount is 3-6 months. In a perfect world, your business will constantly have a higher cash inflow than outflow, but that is not always the case. You should always have a plan for small business financing to supplement your capital reserve, when needed.
Merchant cash advances are a great way to prepare for “what ifs.” They are outpacing loans as a better alternative for small business financing. Both offer a lump sum of cash, but loans are heavily regulated with low approval rates and cumbersome application processes. Merchant cash advances, on the other hand, have advanced with technology, finding ways to provide small businesses flexible, affordable financing. A good merchant cash advance does more than account for future emergencies: you can enjoy its benefits immediately. This article explains why merchant cash advances are not just a plan B for some future mishap; they are useful in the here and now.
Merchant Cash Advances Cushion your Cash Flow
You might come across merchant cash advance ads that boast their MCAs are the perfect plan B for when times are tight for your business. The problem is resorting to plan B implies that plan A failed. Merchant cash advances can be a frontline defense for your finances, not a last resort. They are an anticipatory measure that cushions your cash flow. Cushioning your cash flow with a merchant cash advance not only protects your business from unforeseen expenses, it also frees up working capital. Working capital is the money you use to cover your business’s daily operational expenses. Supplementing your working capital with a merchant cash advance, allows you to reallocate business funds and spend smarter.
A merchant cash advance can make your business less dependent on external factors that are beyond its control; for example, time. Depending on whether it is peak or off season your small business could have trouble financing all of the inventory or operational expenses it needs to keep growing. Time becomes less of a factor when you have a reserve of cash to turn to when demand is lower than the norm. A merchant cash advance also gives you the flexibility to act fast and take advantage of discounts and special offers, for items that you might otherwise not be in the position to afford, but would boost your company’s growth.
Considering a Merchant Cash Advance for Your Business?
There is no denying the convenience of having a merchant cash advance and technology has driven the alternative lending industry to new heights. There are many lenders offering merchant cash advances, but not all of them have your business’s best interest at heart. Remember to do your research before choosing a lender. Check out this article for 4 signs of a predatory cash advance and how to avoid MCAs that can harm your business.