small business loans

What is a merchant cash advance exactly?

When a small business needs to raise capital fast, a merchant cash advance is a quick, painless way to secure funding.

How They Work

Merchant cash advances aren’t loans. They are advance payments against the future income of your company. Clear Skies Capital provides you with a lump sum which you then repay automatically.

A percentage of your daily debit or credit card income is used for this. This percentage that you pay back to us is called the retrieval rate. It varies from between 3 and 20%. It’s calculated by looking at the amount of the advance, your business’s card sales plus the length of repayment. If the advance is a small amount, terms may be just three months. If it’s more, terms may be up to 18 months. The repayment starts as soon as the money has been received.

How Much Can I Borrow?

The amount that we’ll advance you depends on your average card sales. Clear Skies Credit will look over your receipts for the past six months or so to work out how much you qualify for. An advance usually ranges from between 50-250% of your company’s card transactions.

What Are the Advantages?

Merchant cash advances have many benefits that make them an attractive way of obtaining the funds your business needs to grow.

Simple application process: Our easy application process is done completely online. All you need to do is complete our short application form and upload any documents that are needed such as bank account statements. This just takes a few minutes.

Fast approval and funding: This is one of the biggest advantages of a merchant cash advance. We can give a decision within a matter of hours and deposit the funds into your account within days. This is extremely helpful if you have a business emergency to contend with.

Perfect credit scores are not required: Most traditional lenders make a strong credit rating a prerequisite. Clear Skies Capital is an alternative lender and is much more lenient where that is concerned. Approval centers mostly on how consistent your card sales have been in the past. We also look at the length of time you’ve been trading for.

Collateral is not required: Banks require some sort of collateral for a business loan. This is the bank’s insurance in case you default on your loan repayments. However, merchant cash advances are unsecured, meaning that there’s no need for you to put your home or other personal assets at risk.

Payments are flexible: Ordinary bank loans have fixed rates of interest and set repayments every month. This can help with budgeting but becomes a problem if you have a quiet month and cannot make the payment. Merchant cash advances base payments on a percent of your card sales. If business is slow one month, the repayments will be proportionately lower.

High loan limits: Merchant cash advances are quite flexible in how much you can borrow. Clear Skies Capital would possibly be willing to offer much more than a traditional bank.

What Are the Disadvantages?

The main disadvantage of a merchant cash advance is the amount the financing costs. All financing is expensive, and this solution perhaps even more so. One of the reasons is that we, as lenders, have no collateral or guarantees should you default on payments. You should use this product only after carefully considering whether you’ll be able to make the repayments while at the same time growing your business.

Another disadvantage is that this funding has a set value.

Fixed value products aren’t normally the best way of solving cash flow issues. A merchant cash advance may give short-term relief though.

To recap then, merchant cash advances are a type of financing allowing a small business to sell off a part of its future card sales in return for an immediate lump sum. This provides a business with cash to pay running costs and to expand. If you need immediate cash, contact our team at Clear Skies Capital today.

Not sure if a merchant cash advance is right for you ?

Check out our article – Should I choose a merchant cash advance loan?