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Five reasons why merchant cash advance is best for Seasonal Business

Running a successful business is not easy; every business goes through ups and downs, ebbs and flows. There are many factors that determine the success and failure of a business – weather, seasons, political atmosphere, global markets, recession, labor problems and much more.

Certain businesses are more seasonal in nature in the sense, they open shop only during seasons like- Christmas, school vacations, summer or winter and even Super Bowl depending on the goods they trade in. Then there are small businesses that deal in vacation cottages, lawn mowing and snow removal which see a peak only during a particular season.

Thus, aseasonal business can be defined as businesses which have maximum transactions during a certain period of the year. These businesses scale down their operations in the off peak season.

Loans for seasonal businesses

The seasonality of the business is the hero and the villain in the story because while you can make maximum profit in theseason you have no means of covering your payables which remain the same in offseason. Furthermore,it is not easy to get conventional bank loans for these businesses.

The most popular bank loan alternatives are BCA( Business Cash Advance) or MCA(Merchant Cash Advance)

Why is MCA beneficial

Here are five reasons why merchant cash advance is a reliable source of business funding.

  1. Faster processing time: For all seasonal businesses time is the key factor that determines their success and failure. They don’t have the luxury to wait for several months for bank loans to process. In MCA, you can get cash rapidly and within days of application.

  2. Lesser requirements: Regular banks often seen to have unrealistic criteria for approving a loan, but in BCA’s that is not the case. Your credit history and your previous rejections are not taken into consideration when granting the cash advance.

  3. Collateral not needed: Unlike secured bank loans or secured commercial loans which are short term, MCA’s are long term cash advances much like other unsecured business loans and do not need any collateral. As a result, you never risk losing your home, property or equipment and machinery should things go wrong. That is one reason that the interest rates on these loans are much higher.

  4. Easier repayment schedule: When you avail a merchant cash advance you need not pay a lumpsum amount as repayment. Instead, a percentage of your daily transactions goes as repayment. So the days, you have higher sales, you pay a larger amount and thus work towards closing the outstanding balance.

  5. No fixed time for repayment: You will not be penalized like banks in case you repay the full amount before schedule. You can keep paying till the entire amount is deducted. In fact, there is revolving credit facility once you have paid the initial payment.

Is Bad Credit OK?

You must understand that merchant cash advance is not a loan; it is an advance given by the lender for a percentage of your future credit card sales. For such cash advances, a good credit score is not needed. Hence bad credit is Ok and so even a merchant with bad credit and NSF qualifies. In fact, one of the most preferred financing options for high NSF is MCA because it is so easy and fast to get money. The only hitch is the high factor rate.

What is factor rate?

Merchant cash advance is very convenient for the small business in need of money; the price you pay for this convenience is a high factor rate which should not be confused with an interest rate. A factor rate is usually mentioned in decimals and is usually between 1.1 to 1.5. It is calculated by dividing the cost of finance by the total loan amount.

This rate depends on:

  • Age of your business

  • The industry

  • Average monthly sales

What are the various means of using this cash advance

The most common uses that this cash advance is put to by businesses is:

  • To purchase new equipment and repair and service existing machinery.

  • To renovate existing store front and aim for business expansion

  • Increase customer base by including services like extra staff, and running advertising campaigns

  • Purchase goods in bulk to avail discounts and then sell them at profit.

  • Handy cash for any unexpected expenses

  • Clear old debts.

How does the merchant cash advance provider protect himself?

To protect the lender’s interests, a legal notice or lien is placed on the small business. This means that should the business fail to repay, then the lender has the first claim over the commercial property. But in case you need additional funding then you need another lender who is willing to take the 2nd position in merchant cash advance liens. There are3rd position, 4th position and even 5th position business cash advances with the higher number having higher rates since they might not get anything should the business go bust.

Parting words

Bad Credit and High NSF should not deter you from trying to make a success of your business, remember if one door closes another opens. We offer the best solutions to all your cash crunch problems. Contact our managers to help you choose the best solution for all your monetary woes.


Citi Wide Merchant Funding

300 Carnegie Center
Princeton, NJ 08540

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