With the economy in a mess,/all retailers may have opportunities to grow their business, but not the working capital to leverage them. When business owners aren't able to obtain a bank loan, a merchant cash advance may be the solution.

Merchant cash advance services have been around for many years, but have recently become a popular option as business owners have become more educated about them. They are now a more common financing tool for small to mid-sized businesses because business owners and their financial advisor's understand that the sale of a cash advance is similar to the sale of other types of financial assets such as mortgages or accounts receivables. A cash advance company simply purchases a portion of the merchant's future credit card transactions at a discounted rate.

As a beverage retailer, you may be looking to stock up on inventory, remodel or expand your business, or pay off debt going into the New Year. But you may not have many options when it comes to raising the necessary working capital quickly. Bank loans may not be the best solution. They can require a lot of time-consuming paperwork, and may even be impossible to obtain if your credit score is too low, you have no collateral, or the amount you are requesting is too low. When this is the case, merchant cash advances in exchange for a small percentage of your future credit card receivables can be an attractive alternative.

Reasons for obtaining a Merchant Cash Advance

For many beverage retailers, the holiday season is a crucial time of year to maximize sales opportunities. Working capital is necessary to make sure appropriate levels of inventory are stocked and the business is ready for a busy and successful sales period. Having working capital on hand is also very important for carrying out the day to day operations of your business and for preparing it for success in the following year.

Securing traditional loans for these types of initiatives are often problematic for many reasons. Having a high credit score is typically necessary to obtain a bank loan, but even then, you may still be required to provide lots of financial documents, a personal guarantee and collateral. By contrast, merchant cash advances require no collateral, minimal documentation and are often provided to business owners with less than perfect credit scores.

There are many advantages to using a merchant cash advance. The application process is typically quick and simple, with an applicant approval rate of 80 percent and funds received within two weeks of submitting the application.

A merchant cash advance is not a loan, so the business owner is not personally liable for repayment other than in the event of fraud or breach of contract. There are also no requirements for a lien or collateral and no restrictions on business-use. Most cash advance providers do not have a specific payback period or minimum payment amount, as the repayment is directly related to the amounts and dates of the business owner's credit card transactions.

How a Merchant Cash Advance works

The merchant cash advance is a simple method of financing. The cash advance provider buys a fixed amount of the merchant's future credit card sales at a discounted rate. Each time a customer makes a credit card transaction with a Visa or MasterCard for purchase of the merchant's products or services, a fixed percentage of that transaction amount is paid to the cash advance provider. The amount taken from each credit card transaction is automatically transferred to the cash advance provider when the card is swiped. The repayment will continue until the contract obligation is satisfied.

The cash advance provider gets paid only when the merchant makes a sale, thus following the revenue trend of the merchant's business. This promotes healthy cash flow and ensures that payment is not a burden during business downturns.

Is a Merchant Cash Advance right for you?

If you need to obtain working capital for your beverage retail business, consider the following general requirements of the merchant cash advance option. Each cash advance program is slightly different, but these criteria for approval will assist you in determining if this is the best solution for you and your business.

The usual criteria for approval are as follows: