How A Merchant Advance Can Ease Cash Flow Pressures

Hand swiping credit card

A merchant advance allows your business to capitalize on the momentum of future sales. Unlike banks, which make their lending decisions based on credit ratings and other formal criteria, unsecured credit lines can enable businesses to raise funds on much more liberal terms.

With corporate sector growth essential to a healthy economic recovery, the return of unsecured lending products, like merchant advance facilities, is a welcome reprieve for small businesses.

Innovative new financial products are being created across the market to provide businesses with a solution to cash flow difficulties, which hinder growth and prevent investment in new jobs and ideas.

According to NY Daily News, there are a number of ways merchants can reduce the impact of adverse cash flow on their business, including merchant advance funding.

“Uneven cash flow is a big challenge for many small businesses. They will often turn to a bank for a line of credit or other types of financing to get them over the hump. But there are ways to keep the cash flowing even during rough patches.”

A merchant advance is a form of short-term funding provided on the strength of future sales.

To qualify, merchants will be asked to demonstrate an existing volume of sales before being extended short-term credit to enable immediate liabilities to be met.

Merchant advances tend to be repayable over 12 to 18 months, and are often linked directly to card sales. The lender then recoups, at an agreed percentage, the balance from sales over the period.

Facilities like a merchant advance can help businesses survive temporary cash flow deficits.

Hand swiping credit card


Some analysts suggest that through exploring alternative means of raising funding in the short-term, businesses can be in a stronger position for growth.

Small business loans from provide businesses with financing options. And the lender suggests that unlocking cash flow in small businesses nationwide could have a dramatic impact on the economy.

“Businesses across the country are sitting on strong balance sheets factoring in near future sales and payments. These are businesses that could be investing in creating new jobs, but are held back because they lack the cash flow to thrive. Merchant advance programs can enable businesses to regain control over their cash flow, through providing essential short-term finance that can make a real economic difference.”

Small businesses account for a large proportion of employment and growth opportunities in an economy.

Today, small businesses provide jobs for almost 60 million Americans. President Obama has even extended new layers of support and protection for small businesses, in a bid to help get the US economy moving again.

By releasing the equity tied up in small business order books, merchant advances can smooth the period between payments to enable businesses to function on a more cash-positive basis.

Merchant advances were first conceived in the 2000s, as a tool to enable businesses to secure borrowings against future card sales volumes.

With no credit check component, merchant advance arrangements can be used as a more direct source of funding for new businesses.

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