Merchant Cash Advances

As a small business owner, you understand how difficult it is to manage cash flow. Unless you're following Dave Ramsey's method for running a debt-free business, you're reliant on debt as a vital aspect of running your firm. A capital injection can help you expand your firm by recruiting more personnel, purchasing new equipment, and purchasing goods. It can also assist you in smoothing out slow months and ensuring that staff (and you) get paid. However, taking on too much debt, especially the wrong kind of debt, can jeopardize your business.

If you own a business, you may run into cash flow issues. A company must have cash on hand to pay its bills regularly. Fortunately, several organizations provide merchant cash advances to help businesses thrive and cover their expenses.

A merchant cash advance is a lump-sum payment made to a company in exchange for future sales and/or debit card sales. Merchant cash advances are generally less than 24 months, with frequent small payments covering each working day. Typical bank loan payments are made every month, whereas a merchant cash advance is made on a short-term basis.

Traditional bank loans were less readily available for smaller, less established small enterprises like yours in the aftermath of the financial crises. Even SBA loans are out of reach or too complicated for many business owners, leaving them with no choice but to rely on more expensive and riskier alternative financing options such as credit cards, invoice factoring, and Merchant Cash Advances (MCA). It is predicted that over $15 billion in alternative loans were funded in 2017, and that figure is expected to rise further.

Non-traditional lenders aggressively pitch these loans to desperate business owners like you, who are so focused on keeping their enterprises afloat that they fail to realize the hidden risks they are taking. If you've already fallen victim to one or more MCAs, we can assist! We'll assess your situation and advise you on the best feasible debt structure to keep your company from crumbling under the weight of debt and subsequent collection proceedings.

Here are just a few of the ways you can get out of a merchant cash advance:

1. Substitute a low-interest term loan for a cash advance.

You can replace your merchant cash advance with long-term, low-interest monthly payments. Switching to this option will significantly reduce your monthly payments because you can obtain a lot more affordable loan if you make a monthly payment. The monthly payments are also lengthier in duration, ranging from two to five years. You could, for example, incur financing fees of up to 500,000 dollars. The interest rate on this loan, which you must pay every month, might range from 6% to 30%.

On the negative, even if you have switched to a long-term monthly payment loan, you must still pay for the merchant cash advance. Even if you paid in advance, you must still pay the finance charges. To be qualified for this form of installment loan, your company must meet a few criteria. You must have a credit score of at least 600 and have made a lot of money in the last two years. You should also be able to provide two years of tax returns, and you should not have had any substantial liabilities, such as bankruptcies, in the previous years. This is an excellent option to get out of a merchant cash advance if you meet the requirements.

2. Obtain a High-Rate Loan

If you do not qualify for the first choice, you have the option of taking out a high-interest loan. When you choose a merchant cash advance, you are already in high-interest debt.However, merchant cash advances are only available for a short period. While you may obtain a good loan, you should be aware that the interest rates and payments can be extended for years, even up to ten years.

If you decide, you can pay off these loans early and save a lot of money on interest. This may be difficult, but what is even more difficult is that you will be plagued with multiple financial advances. If you take out a loan with long-term payments, it can still be profitable. Despite the high rates, monthly payments can be reduced by up to 50%.

3. Hire a Negotiator to Assist You

The good news is that you can negotiate your business debt. If you are having difficulty repaying your merchant cash advance, you can renegotiate the terms. You must hire a debt restructuring organization or a merchant cash advance attorney to handle the negotiations on your behalf. However, you should be aware because some of these companies need a substantial fee before acting on your case.

You must select a firm that can assist you fairly and effectively. Some debt negotiators will not ask for money until they are confident they can assist you. Choose your debt negotiator wisely and ensure that you achieve a fair settlement with their assistance.

4. Make Use of Asset-Backed Loans to Pay Off Cash Advances

You may have many valuable assets that can be used as collateral to repay loan advances. Natural land, heavy machinery, and huge vehicles such as trucks are examples of valuable assets.These assets can be used as security to repay your cash advances and eventually get out of a merchant cash advance. However, the disadvantage of this strategy is that you may be unable to pay off your debts, resulting in the loss of your assets.

Last Thoughts

Having a business can be difficult, and obtaining the funds to run a firm can cause a snag and a slew of problems. You must repay loans incurred due to your business to avoid becoming indebted and causing your company to lose money. There are numerous ways to get out of a merchant cash advance, and with careful planning, your business may prosper and exist despite needing to repay loans.