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Say your business gets a sudden surge in demand and you need some urgent stock, or even some temporary staff to take advantage of the opportunity. You’ll likely need money for those things now, which your normal cash flow may not allow. A Merchant Cash Advance could help by providing a swift injection of cash which you can use to fund your business needs, then repay as you benefit from the increased sales.
A Merchant Cash Advance is unique in the way that the loan is calculated and paid back. The amount loaned is calculated on your business turnover, and paid back at an agreed percentage of your daily card/eftpos sales. The interest is agreed at the outset of the loan, and is applied to the full amount, this is the amount you will pay back, at the agreed percentage of your sales. No matter how long it takes to pay it back, you will pay the same total sum.
The percentage charged can sometimes varies between about 1.2% and 1.4%. So, for an advance of $50,000, at a rate of 1.25%, you could pay back $62.500. And, as those repayments are as an agreed percentage of your card sales, it could take you say 3 months or 18 months to pay back, either way, the total you pay back remains the same, though you may incur additional fees over a longer period.
A Merchant Cash Advance can be one of the quickest methods of getting cash into your business. If your business has a steady sales record, it’ll usually make it easier to qualify. Here are some reasons a Merchant Cash Advance may be used:
There are many benefits to a Merchant Cash Advance, these can include:
Yes, there are ‘downsides’ to an Merchant Cash Advance, to compare against the benefits they offer. Some of the cons to consider are:
Generally, no asset is required for a Merchant Cash Advance. The security of the loan is your future sales, and the qualification for the loan is typically your previous sales record.
Very quickly, compared to some other business loan products. Sometimes they can be funded within 1 to 2 days.
Merchant Cash Advances are basically backed by your sales, so lenders are usually not so concerned with your credit score and don’t need so much information. If you have a stable business, with a good volume of sales and a consistent cash flow, you may well be eligible.
Things which may make you ineligible include:
At iSelect we’ve partnered with Valiant to make it easy for iSelect customers to find a business loan product that suits their business. Valiant compare a range of products from over 80 lenders across Australia, and can manage the process of finding and applying for your finance solution, as well as settling funds. Get started comparing online today!
Last updated: 18/10/2021