In uncertain economic times, businesses often require immediate access to cash for various expenses. While traditional business loans may not always meet their needs, a viable alternative is a merchant cash advance. This article, brought to you by SGP Credit, provides an in-depth understanding of merchant cash advances, their suitability for businesses, how they work, and the differences compared to traditional business loans.
Navigating through uncertain economic conditions as a business owner can be challenging. When faced with immediate financial needs, traditional business loans may not be the most suitable option due to strict terms and conditions. In such situations, a merchant cash advance from SGP Credit can provide a quick and flexible financing solution for Singapore businesses, particularly those that primarily rely on credit and debit card sales. This guide explains the concept of merchant cash advances, their suitability, the working process, differences from business loans, and how to calculate the associated costs. By gaining insights into this alternative funding option, Singapore businesses can make informed decisions about their financial needs.
What Is a Merchant Cash Advance?
A merchant cash advance, also known as a business cash advance, offers quick funding for working capital needs. It involves receiving a lump sum payment in exchange for a percentage of future sales. This financing option is particularly suitable for small businesses with flexible credit requirements, especially those that derive the majority of their revenue from credit and debit card sales.
How Does a Merchant Cash Advance Work?
Unlike traditional business loans, a merchant cash advance deducts a percentage from daily credit and debit card sales instead of providing a lump sum. This repayment method, known as the “holdback,” fluctuates daily based on sales. SGP Credit collaborates with payment processors to streamline the process, ensuring seamless deductions from sales receipts. The convenience and speed of this funding option make it attractive for Singapore businesses in need of immediate cash.
Differences Between a Business Loan and a Merchant Cash Advance:
A merchant cash advance differs from a traditional business loan in several ways. Firstly, it is not subjected to the same scrutiny or regulations imposed on loans, making it a faster and more seamless option to obtain funds. Additionally, unlike loans, merchant cash advances do not require a fixed repayment schedule or collateral. Personal and business credit scores also rarely play a significant role in determining eligibility for a merchant cash advance.
Calculating the Cost of a Merchant Cash Advance:
The cost of a merchant cash advance is determined by a factor rate rather than an interest rate. Factor rates are decimal figures established by SGP Credit based on risk assessment. Several factors influence the factor rate, including the industry’s risk level, the length of time the business has been operating, business sales and growth, and the business’s credit history. By multiplying the cash advance by the factor rate, Singapore businesses can calculate the total amount they will need to repay.
Merchant cash advances from SGP Credit offer Singapore businesses a quick and flexible financing option, particularly those heavily reliant on credit and debit card sales. While they may come with higher costs compared to traditional loans, they provide an alternative for businesses with unique financial needs. By understanding the process, suitability, and costs associated with merchant cash advances, Singapore businesses can make informed decisions regarding their financing options.
Contact SGP Credit today for a free non-obligated consultation:
SGP CreditPte Ltd
Address: Blk 133 Jurong Gate Way Road #01-299, Singapore 600133