What You Need to Know about a Merchant Cash Advance

Feb 6, 2020

What You Need to Know about a Merchant Cash Advance


A merchant cash advance is a charter member of the family of financing products known for delivering money to your bank account at blazing speeds. This quickness can be essential even if you’ve planned meticulously for your business expenses because there’s only so much you can do or foresee.

Some in the small business world actually scoff at the idea of planning. They argue that forecasting is impossible for something as mercurial and unpredictable as entrepreneurship. Rather than waste time crunching numbers and staring into your crystal ball, they say, you should do everything in your power to remain limber. By staying on your toes, you’ll be ready to dodge, duck, weave, and pounce as necessary.

While there’s some truth to this sentiment, the power of planning will never be diminished. In the words of President Dwight Eisenhower, “Plans are worthless, but planning is everything.”

As you do your best to anticipate what’s coming down the pike, you’ll accomplish 2 things. First, you’ll prepare yourself financially for the recurring expenses you already know you can count on. Examples of these include utilities, rent, marketing, and inventory. Second, you put yourself in a position to set money aside for the things you don’t yet know about.

Depending on your industry, unexpected expenses can run the gamut. Common examples include property repairs, equipment replacement, vehicle upgrades, and inventory glitches. Perhaps you need extra money to pay off creditors or keep your business afloat during a slow season. Or you may want to take advantage of a new business opportunity you’ve encountered.

“Budgets are traditionally woven into the fabric of most businesses,” explains Mark Rygelski, an expert in financial strategy. “Everyone uses them. Banks require them. Employees expect them. But, in reality, budgets are terribly ineffective management tools. They are treated as something revered and to be adhered to without question […] When you create a budget, you can do your best to plan for the unexpected, but the very definition of ‘unexpected’ dictates things never happen the way you think they will.”

Between recurring expenses and the inevitable challenge of unexpected costs, cash flow is a major stress for most businesses. Research shows that the majority of small businesses in America only have enough money on hand to cover 27 days of their average outflows. And the top 25% of the businesses that participated in this study only possessed enough money for 2 months.

Clearly, cash reserves are in short supply. The problem isn’t necessarily a lack of planning. It’s the tight profit margins of most small businesses. Yet it takes money to make money. As Forbes so astutely put it, “cash is king.” And when you need to get your hands on some cash in a hurry, it always pays to have good options.

About the Author

Grant Olsen

Grant Olsen

Grant Olsen is a writer specializing in small business loans, leadership skills, and growth strategies. He is a contributing writer for KSL 5 TV, where his articles have generated more than 6 million page views, and has been featured on FitSmallBusiness.com and ModernHealthcare.com. Grant is also the author of the book "Rhino Trouble." He has a B.A. in English from Brigham Young University.

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