Often in business, you need to pay for things when there isn't enough cash on hand to do so. It might be to pay for running costs or a stock item that sold out faster than planned. Many business owners will find the need to use overdraft facilities in times like these. But business overdrafts come with hefty interest rates. This can be especially true when it isn't repaid by the end of the month. In times like these, a cash advance is a great alternative to overdrafts, and it might even be a better option.
What's an overdraft?
This is when there isn't enough cash in an account to cover a transaction or payment, but the bank still allows it. Basically, it is a loan from the bank that is given when a person's account balance hits R0. The overdraft lets the account user keep taking money out of the account even when there isn't enough money in the account to cover the withdrawal. As with any loan, the person who takes out an overdraft loan pays interest on the amount still owed. Most of the time, the interest on the loan is lower than the interest on credit cards, which makes the overdraft a better short-term choice in an emergency. When you use overdraft protection, you often have to pay extra fees, like insufficient funds fees per withdrawal. Overdraft fees can be charged by banks, but they can't change the order of a customer's transactions to charge more overdraft fees.
What is a cash advance?
A merchant cash advance (MCA) is a form of alternative lending that is meant to make it easy for businesses to get the money they need, fast. An MCA, also sometimes referred to as ‘growth capital’, can be used to pay for short-term business needs like merchandise, marketing activities, or advertising.
Essentially, the lender you are transacting with agrees to buy a certain amount of your business's future sales. Your repayments adapt according to how well your business does in the coming months. Allowing you to pay back more when the business is busy and less when business is quieter. The upside of this is your business is able to grow without you having to worry about set monthly payments, which can put your business under unnecessary pressure.
What's good about getting a Cash Advance?
At Merchant Capital, we don’t ask you to put up any security like a bank would. This makes it less risky for you to get cash for your business.
The cost of capital is fixed
We don't use an interest rate that changes based on how the economy is doing. You know exactly how much your business will pay back from the first day. This lets you plan your spending and figure out how to spend your money.
We don't take out a set amount every month; instead, you can choose between daily debit orders, weekly debit orders, and split-processing. Split-processing also doesn't have any debit order fees, which means that over a 12-month period, you can save more than R10 000 in debit order costs alone.
Use the cash as you like
Since you know your business needs better than anyone else, you can use the money in any way you think is best. Like training, marketing activity, or buying new merchandise.
Our application process is designed to be as quick and easy as possible to save you time and empower you to act fast when opportunity knocks. If you have all the information required, you could get your cash advance as soon as 48 hours after you apply.
The bottom line
While overdrafts are useful for spending when you don't have enough cash on hand, a merchant cash advance is a great option for savvy business owners. To grow your business in the next 48 hours, contact Merchant Capital today.