Alternatives to Merchant Cash Advances

By David Harrison
Content writer
Last update: 31 December 20181 minute read
Alternatives to Merchant Cash Advances

Table of Contents

For many business owners, a Merchant Cash Advance can be an important pillar of support, whether because of seasonal trade fluctuations, growth projects, business emergencies and so on. However, as versatile and far-reaching as the product may be, a Merchant Cash Advance may not always be the most appropriate solution for your particular business or stage of growth. So, if you feel that a Merchant Cash Advance might not be right for your business, don’t worry, there are many other options available to you that may be much more appropriate for your current business situation, just ask one of Rangewell’s finance experts.

Alternatives to Merchant Cash Advances

The Merchant Cash Advance is often considered a fast and flexible means of accessing external funding, using the revenue streams generated by your credit and debit card sales. Naturally, to qualify for this type of funding your business must be able to accept card and digital-based sales. Although Merchant Cash Advance may offer some very unique and exciting benefits, some business owners may feel that this option is not quite right for them.

Not all businesses are able to accept card payments, whilst others could see the variable nature of the Flexible Monthly Repayment scheme as a hindrance that makes effective budget management harder to achieve. Add to that the fact that Merchant Cash Advance can be expensive, often featuring fees and interest rates in triple digits. Yet, if you feel that the answer to your funding needs lies elsewhere, know that there are plenty of other finance products available that can serve you just as well, including Business Loans, Revolving Credit Facilities and Invoice Finance solutions to name just a few.

Business Loans:

Business Loans are a great way of acquiring a lump sum for your business and utilising the funds in however way you see fit. A traditional means of financing your business’ unique requirements, this type of funding is usually classed as either secured or unsecured.

Unlike Merchant Cash Advance solutions where you need only present lenders with your monthly sales reports, loans require you to submit your credit score, business history and bank statements. If you happen to have a low credit score or any outstanding CCJ’s this can make this form of finance more expensive and harder to obtain. In addition, you’ll also be subject to making fixed monthly repayments for an agreed term, plus interest.

Should you choose to apply for an unsecured business loan your business could reap the benefits that come from a lump sum starting from £5,000 up to as much as £250,000. With an Unsecured loan, you won’t be required to provide assets as security but should acquiring the necessary sums prove challenging you could offer potential lenders a Personal Guarantee. On the other hand, by choosing a Secured product you could gain access to a lump sum in the region of £5,000 up to as much as £1,000,000. In exchange for this higher amount, you’ll need to provide business or personal assets as security.

Revolving Credit Facilities:

Like Merchant Cash Advance, Revolving Credit Facilities are also considered another great way of accessing quick cash and using it to support your business. Credit Facilities operate very much like a credit card, where you’re borrowing money from an account set up by the lender. You’ll be given an agreed credit limit stating exactly how much money you’re able to withdraw each month. Should you go beyond the limit you’ll be required to pay an overdraft fee. But, it’s also worth noting that if you don’t withdraw any money on a particular month then you’ll pay nothing for the month concerned. This form of finance is a useful way of funding short-term projects, paying bills or responding to emergencies, but some borrowers may argue that they find the terms restrictive.

Invoice Finance:

Invoice Finance allows you to unlock the money held by any unpaid invoices that your business may have accumulated. As such, it is a popular means of providing support, accessing quick cash and funding a variety of business projects, making it an ideal choice for many borrowers. If you’re a business owner that has outstanding invoices, or regularly works around them, Invoice Finance can be highly beneficial. When considering this method finance for your business, it’s essential for you to understand the two different types you can apply for and how they work.

  • Invoice Factoring: lets you borrow a lump sum equivalent to around 90% of an outstanding invoice’s overall value. By choosing this option you assume the role of the credit controller, ensuring that payment owed by the customer in question is forthcoming. Until you’ve received full payment, or begin taking regular instalments, you won’t be required to begin the fixed monthly repayment process, plus interest. That said, lenders may specify a cut-off period stating exactly how long they’re prepared to wait. Should this period expire, the lender will begin the repayment process, regardless of whether or not you’ve been paid.
  • Invoice Discounting: allows you to borrow up to 80% of an outstanding invoice’s total worth. With this option, however, the customer responsible for the invoice will, instead, pay the sum owed directly to your lender. You also have the option of making yourself the credit controller or making use of the lender’s ledger service, if available. Once the lender has received full payment from your customer, you will be required to transfer the remaining 20% into a facility run by the lender. After the deduction of any fees and service costs the remaining sum, or balance, is returned to your account.

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