Many businesses occasionally require an influx of funds to keep cash flow strong and spur growth. One attractive financing alternative is a merchant cash advance. This involves receiving a lump sum that you pay back with a percentage of future credit card sales. Here are some strategies that will help you make the best use of this funding method.

Consider Your Goals

Before you apply for a merchant cash advance, set specific financial goals. For instance, you may need to hire new personnel, buy equipment, complete a project, or facilitate company expansion. Knowing what you are aiming for helps you focus the spending of the money once you receive it.

Assess Whether a Merchant Cash Advance Is Right for Your Company

To qualify for this method of funding, your business needs to make a significant portion of its income through credit card sales. This makes merchant cash advances ideal for cafes, restaurants, shops, and other service businesses.

Maintain Good Financial Habits

Financial providers will be more likely to approve your application for a merchant cash advance if your company has a history of paying bills and creditors on time. On the other hand, they will probably refuse your application if you habitually make payments late and allow negative balances.

Heed the Details

Before you make an agreement for a merchant cash advance, read all the fine print in the contract you are offered. Because the industry of alternative finance is not well regulated, pay close attention to options for repayment and interest rates. You will also need to set a repayment period, which might vary from one to six months.

Gather Documentation

An application for a merchant cash advance does not require as much documentation as you would need for a traditional bank loan, but you will need to gather together a limited amount of paperwork. This will include bank statements, credit card revenues, and other documents that show the financial state of your company.

For more advice on using a merchant cash advance for funding your business, contact Topfund Capital.