Merchant Cash Advances may Rescue You from Your Tax Returns…
Merchant cash advances are a great alternative way to finance cash business. Mainly due to a huge catch 22 that affects them.
These types of cash businesses are well known for being difficult to
finance traditionally.
- Restaurants
- Auto Repair Shops
- Hair and Nail Salons and Spas
- Barber Shops
- Convenience Stores
- Men and Women’s Clothing Stores and
- Other Brick and Mortar Retailers
I’ll explain how cash advances resolve this problem as I answer specific questions raised by business owners today.
Your Questions
Why are merchant cash advances especially important for cash businesses?
Well then if they’re not business loans? What are they and how are they different?
How do they work? How can they benefit me?
Real Answers
Why are merchant cash advances especially important for cash businesses?
Here’s the caveat about cash businesses. Their biggest asset during tax time becomes their biggest liability when trying to secure financing.
Most every business owner wants to maximize their tax write offs right? I know I do. Don’t you?
We go through great lengths to find just the right accountant. One who knows all of the applicable tax laws needed to save us money on our taxes.
So even if these businesses profited (after the write offs) their tax returns show zero or negative income.
This is a big time problem with banks. Lenders want to see tax returns that show significant and consistent positive income and cash flow.
Business owners aren’t thinking that a lender will say, “Oh, I see you didn’t make any money this year, last year, or the year before that. Why would give you a loan?”
Instead, the business owner is thinking is more like this, “Hey, I did make money. I just maximized my write offs on my tax returns. But I did make money. I promise I did make money!”
Yet, lenders will still shake their heads, “Sorry. Can’t help you.”
For cash businesses, understanding how to use alternatives to traditional business financing is a must!
If you’re in a cash business or a business claiming low to negative income, I encourage you to become educated and quickly about other ways to finance your business.
Because if you’re not educated, you could become a victim of the credit crunch unnecessarily.
But have no fear. Merchant cash advances to the rescue….
Yes, the good news is that there are viable alternatives that may prove better to you than a bank ever could be.
You can learn about them on this website like factoring, equipment leasing, building business credit and etc. But for right now we’re going to focus on my personal favorite of all. Among the very best available to date hands down are merchant cash advances.
Did you know that Merchant Cash Advances are not loans?
You heard right. Not a loan at all.
Well then if they’re not business loans? What are they and how are they different?
A loan is when a lender says, “Return to me these dollars with a set amount of interest please.” Everyone shake hands. We sign a contract and so forth.
“Now remember, you’ve got to pay me every month at a certain set date and if you don’t you’ll incur late fees, dings on your credit, and higher interest rates. Thank you very much”
You know the drill.
But a cash advance is different. Particularly a Merchant Cash Advance.
Here’s how it works. You need to have been in business for at least 6 months and earning income through a credit card machine.
Don’t have one? No worries. We can help you get set up with a free credit card machine. Click here to request more information about that.
But do get one set up. Particularly if you’re a cash business. Very Important.
OK. So, now you’ve been set up for at least 6 months, you’ve established your credit card sales and you’re making at least $2,500 gross per month from your credit card sales.
Good deal. Good work. You’re doing something right out there!
How do they work? How can they benefit me?
Lenders… I’m sorry. Merchant Cash Advance Providers…
(We don’t call them lenders because again, they’re not giving you a loan. They’re providing a cash advance so they’re called Merchant Cash Advance Providers.)
They’ll say, “Hey, you’ve made $30,000 per month for the past 3 months! We’ll forward you anywhere from $30,000 to $90,000 (up to 300% of monthly sales) if you’re willing to pay us back more than that over a period of time.”
For example, if you want $30,000, we want you to pay us back 35,000 or if you want $90,000, we want you to pay us back $105,000.
“And guess what, we’re willing to wait to get our money back. Here’s the way we want to structure this. As people make transactions, were going to take some of our money back little by little by little so that over time we’ll receive all the money owed to us while barely effecting your daily operations at all.”
You see merchant cash advances are not loans you pay back with a monthly minimum payment. So you don’t have to worry about did we make enough money to pay the bills this month. Here are some other things you can rest easy about.
- No such thing as late fees
- No personal guarantee
- Doesn’t show up as a debt on your credit report
- No risk for collections if the business goes belly up
- No credit score requirements
- No collateral
Instead, you simply pay as you do transactions.
So a customer comes in and spends $100 in your store. The merchant cash account provider has established a rate with you of 7% per sale. So in this instance, $93 goes to your account while $7 went to your provider’s account.
When done right, this is a win-win situation for everyone involved because you as the business owner enjoy financing without the crunch of a business loan.
You received up to $90,000 and as long as you’re in business and doing sales, you’re going pay that cash advance back likely within about a year or so.
Here’s more good news…
Even before that year is up you’ve pretty much established a good relationship with that Provider.They won’t want to lose your business just because you’ve just about paid them up.
They’ll do everything in their power to say “We like doing business with you. We’ve noticed that your credit card sales have increased to $50,000 per month and now we want to advance you $150,000. How would you like it if we send you that cash advance within 10 days?”
You’ve already become accustomed to paying them back with every transaction so it won’t be a difficult thing for your business to respond, “Yes, we’ll be glad to take the money.”
Merchant cash advances basically create a consistent alternative source of funds to finance your business. When done correctly, it’s a sweat deal for everyone involved.
More questions about merchant cash advances? We'll be making every effort to answer your questions right here on this website.
Send your question through the Business Loan Express Contact Us page.
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