We are living in an era of evolving technological trends. Every day you come across new features and upgrades to enhance user experience. Well, coping with technology and staying ahead of technical updates is essential, especially when you are running an IT business. It is crucial to upgrade your systems with the latest programs and software, closing doors for potential security threats.
However, these upgrades and new systems are substantially expensive, and your budget might not give a green signal for it. Therefore, looking for some funding options could be the perfect solution to help finance the capital investment for your business. If you are skeptical about getting a traditional bank loan due to fixed repayments, explore other options like merchant cash advances.
It lends money using a portion of the business’s future sales and charges a fee. Thus, you no longer have to cough up money on interest or late payments.
The following are the benefits of using a merchant cash advance for your IT business:
1. Easy Accessibility to Cash
Almost every business is struggling to maintain a decent credit score because of uncertain economic conditions. Similarly, companies with poor credit scores find it very challenging to acquire funds from external sources. Every financial institution wants to catch a glimpse of your credit history before lending you money. Surprisingly, this is not how merchant cash advances work.
They focus on your revenue generation because repayments are dependent on the sales of your business. Thus, they would easily lend you cash if you reach the minimum target of credit card sales. So, in case you don’t have a favorable credit score, search for a merchant cash advance with bad credit from a reliable financial institute. It is a fantastic option for companies that need funding with less than optimal credit.
2. Quick Approvals with Fewer Requirements
Sometimes, businesses need instant upgrades. For instance – the old desktop computers are no longer functioning, and you need to get new laptops for the entire staff. Similarly, a new upgrade just hit the market that can improve the financial performance of your business. It is impossible to delay these things since it halts business operations. After all, it would be tough for the employees to work without laptops?
Thus, you need to get funds quickly, and merchant cash advances have quick approval rates. Merchant cash advances are straightforward. You don’t have to worry about pinching pennies for down payment or security, nor they ask for collateral. Similarly, there is no need for submitting business plans, cash flow projections, etc. They only your business credit card statements for the past three months.
You have to fill a one-page lengthy application and attach invoices along. You can get approval within 24 hours after applying and funds after a couple of days. Moreover, it ensures transparency; there are no hidden charges or penalties. You will get to know the underwriting fees and other costs once you apply since it depends on the nature of the business, level of risk, and industry.
3. Combats Cashflow Problems
Usually, businesses have favorable financial statements with increasing profits and sales, but not enough cash. That happens when you end up selling to the majority of customers on credit, while they take forever to pay back. It creates many issues since your business might not have enough cash to get the printer’s cartridges. Merchant cash advances cater to cashflow problems by lending businesses the money they need, in return for some percentage in future sales of the company.
The time-period depends on funds you have acquired, maximum the merchant cash advance lasts for ten months. If you don’t wish to share your sales for ten months, then set a higher percentage for quicker repayments. It immediately resolves short-term cashflow issues, helping businesses continue their operations smoothly.
4. Revenue-Based Repayments
Unlike traditional loans that demand fixed repayments and interest every month, merchant cash advances offer flexibility to businesses. Even though financial projections give a rough idea about business performance, but you never know what happens in the future. Some days, sales might be touching the sky, while other days, it is becoming difficult to cover the expenses.
With merchant cash advances, you have to pay a small portion of your revenue as repayment of the loan. So, if your business is not doing well, you at least won’t have the pressure of making high repayments since they would also be low, aligning with your revenue. Similarly, the sky-high revenues can help you pay the advance faster. Honestly, it can be a life savior for many businesses, saving them from drowning into losses.
5. Maintains Equity and Control
The needs and requirements of IT businesses are very different from others. Most of the financing options dictate how you have to spend money. For instance – with equipment financing, you can’t spend money other than on purchasing equipment. Merchant cash advances give you complete authority over the funds you have acquired. They don’t put restrictions on the use of funds, nor ask you to pledge your accounts.
Hence, you don’t have to worry about signing your life away; instead, you have the option to use it your way. The lenders are only interested in the sales invoices of your business. It offers the freedom to use money; you can invest in fintech, install new systems, automate functions, or provide training to employees. Similarly, feel free to invest in modern laptops, software, or devise an application. It is up to the business, how they wish to use this money.
The competition is increasing with every passing day; businesses are looking for every possible way to find an edge over its competitors. Expanding and upgrading the company is the only way to become a market leader, and this becomes possible when you get your hands on the right funding options. Merchant cash advances are helping businesses to grow, rather than seizing profits. Alongside saving you from interest, it offers flexible payment plans. Hopefully, with the help of the above-mentioned tips, you can select a suitable financial plan for your IT business.