Merchant Cash Advances for Handling Remodeling Costs

Remodeling and expansion can be good illustrations of how to best use a Merchant Cash Advance. By using the money to create something better in your business, you encourage growth and can increase earning potential.

An Illustration of a Merchant Cash Advance in Action
Let’s say Sarah’s Seafood Shack has been a busy little place in Miami for the past 3 years. Sarah wants to add a larger deck and update the interior to create a slightly warmer atmosphere; one that she feels will bring in more family business.

Sarah talks to local contractors and gets some ballpark pricing on the work she wants to do. When she added in the costs for new chairs, some additional stock and a few other necessities to make it all work, her project had a total price tag of around $32,000.

Sarah estimated that she would be able to add 35% more seating with her new layout, and anticipated her final result would likely be a sustainable 20-30% increase in annual sales. Understanding what she was facing, Sarah felt the anticipated annual monetary increases offset her known risks. She decided to move forward.

The Seafood Shack regularly processes an average of $37,000 in monthly credit card sales, and the busiest season of the year was just around the corner. Sarah knew she’d have to act fast to get her upgrades finished in time to capitalize on the increased traffic.

Sarah applies, and is approved for a $35,000 Merchant Cash Advance. She works quickly, and has the money in hand in less than 5 business days. She immediately invests it in remodeling and upgrading the Seafood Shack as planned.

The work takes about 13 full days to complete. There were a couple of unseen problems, so the total cost was about $34,400—which was still just a little less than she had in-hand and available. Sarah spent $500 on a banner announcing her grand reopening, and re-launched the new and improved Seafood Shack…just in time to take full advantage of the increased traffic of her busiest season.

Some of the Benefits:
Sarah’s illustration points out many benefits that can be had from using a business cash advance to update and upgrade your establishment.
1. It is quick and easy. The application process is simple and the money can be in your hand in as little as 72 hours.
2. Use this money to make more money. By using the money to improve and add into an existing location, you can increase your long-term earning potential. Increased business will also help you to meet your Merchant Cash Advance obligation more quickly—an added perk!
3. Spend it on any business need. In the illustration above, Sarah used money to pay for remodeling and new inventory. When her price tag inflated she was ready with the cash to keep things moving, and had saved enough to promote her efforts with a new advertising banner. Like Sarah, how you decide to spend the money is your decision. A Merchant Cash Advance can be used to answer a variety of business needs.

Remodeling or expanding a successful location is one of the best uses for a Merchant Cash Advance. Applying working capital as fuel for growth strategies is very often how good businesses blossom into great businesses. An old saying goes, “It takes money to make money.” Use a Merchant Cash Advance to remodel and improve the possibilities of your small business, and you will see first-hand that it is true.

What do you think?
If you had the money to do whatever you want to improve your business, what would it be?

Can I Use an MCA for Start-up Costs?

In most cases, no, you cannot use a Merchant Cash Advance for start-up costs.

Qualification for a Merchant Cash Advance requires a review of up to 12 months of credit card processing statements. A start-up will not be able to produce these statements, and so a brand new business owner will have difficulty qualifying.

Can I Use My Projections of Anticipated Credit Sales?
Unfortunately, no. Merchant Cash Advance underwriters have years of experience in understanding how businesses cycle and operate, and even they are not able to accurately predict future credit card sales without examining statements and specific historical data.

Lots of businesses sound like great ideas. But how they look on paper and how they behave in the marketplace might be two entirely different things. Credit card processing statements help to remove the guesswork. The provider can see in black-and-white how well your small business is performing.

Do You Always Need 12 Months of Statements?
Not usually. A reputable Merchant Cash Advance provider will try to quickly get the most accurate picture possible of your small business. Usually, most providers can get a clear picture of what to expect with 4-6 months of statements, sometimes it takes more--it really depends on the complexity of the deal. Every business and every deal is different. A full year’s worth of processing statements will help to show your potential provider any seasonal trends or sales patterns worth deeper investigation.

Do be wary of a provider who does not ask to see at least 4 months worth of activity. It is very difficult (if not impossible) to understand how well a business might perform without looking at enough historical data. Keep in mind that if a provider asks to see more than 4 months of statements, it is normally just an effort to better understand how to best serve your business needs.

Where Else Might I Go for Start-up Resources?
Many small business owners try the Small Business Administration (SBA) (found at: http://www.sba.gov/). While the requirements for SBA assistance can be fairly strict, a qualified business owner can find many worthwhile resources through the SBA and its many programs.

Another good option for some entrepreneurs to get started is using angel investors. Angel investors might act independently or as part of an angel-investor network. There are regionally-focused investors and angel investors specific to many industries. To start a search for angel investors, Inc.com compiled a very handy list of resources: http://www.inc.com/articles/2001/09/23461.html

Other common sources for start-up funding could include friends and family, venture capitalists (http://www.nvca.org/), and of course, banks.

What do you think?
Is start-up money the only thing keeping you from launching your own business?

Can I Use a Merchant Cash Advance for Taxes?

While a Merchant Cash Advance can be used quite successfully to handle your business’ tax obligations, it is important to note it will not work for handling personal tax payments.

A Merchant Cash Advance must be used for a business purpose, and a personal tax obligation is not considered a business expense.

Pay Off Quarterlies
If you are looking to handle your business’ quarterly tax payments, a Merchant Cash Advance might be a great option to consider. Another way that business owners have used a Merchant Cash Advance to their advantage during a tax crunch is to handle routine expenses with a Merchant Cash Advance in order to have the flexibility to devote more resources toward a tax obligation. Sound easy? It is.

Slower Season? No Problem.
One of the benefits of using a Merchant Cash Advance is that your payments align with your business’ cash flow. This means if a slower season or a little down time happens to occur, you can reduce the impact this has on your ability to stay current with your obligations. If your business’ credit card sales slow down a bit after you have received funding, your Merchant Cash Advance payments will likewise be less. As business picks back up, the payments you make will increase accordingly. Merchant Cash Advance providers get paid when you get paid. (Learn more about How a Merchant Cash Advance works).

No Strings.
Tax time can make anyone a little anxious. Even when you see it coming, it can feel like it takes you completely by surprise. Coming up with a lump sum of cash for a quarterly payment can feel intimidating. Nerve wracking. Alleviate your stress by knowing you have it covered. A Merchant Cash Advance is your ace in the hole. It is simple, and can help you stay on track.

This is a funding product specifically designed to be easy…easy to understand and easy to use as needed. There are no hidden fees or unplanned charges. No strings. A Merchant Cash Advance can help remove the worry from tax time.

Get what you need, and get back to business. Simple.

For more information on small business taxes, refer to the Internal Revenue Service website: http://www.irs.gov/businesses/small/

What do you think?
What do you consider the worst part of taxes for a small business owner?

What are Common Things that Stop a Deal?

While a Merchant Cash Advance (or MCA) is a relatively easy way to get working capital, there are some common business elements that can hamper or even kill a deal. It makes sense to know as much as you can about what to expect from a Merchant Cash Advance deal, including things that might hurt your chances.

These are 5 common things that will usually stop a Merchant Cash Advance deal:

1. Not processing credit card sales. Since this funding is based on a purchase of your business’ future credit card sales, you MUST process credit card sales before you will qualify. Surprisingly, many businesses that apply for a Merchant Cash Advance don’t process any type of credit card sales. Not surprisingly, until they do process regular credit card sales, these businesses won’t get very far with a Merchant Cash Advance application.
2. Not processing enough credit card sales. You may not qualify for a Merchant Cash Advance if your business does not process sufficient credit card sales. For example, if your business takes in $100,000 a month on average but only $500 of these sales are typically attributed to credit sales, you may not be processing a large enough percentage of credit sales to make you a good candidate for a Merchant Cash Advance. And if within the same scenario all but $500 were handled as credit sales, this imbalance might again have an adverse effect on your ability to qualify for a Merchant Cash Advance.
3. An outstanding bankruptcy. If you have an outstanding bankruptcy or one that has been discharged less than a year, you may not be eligible to qualify your business for a Merchant Cash Advance.
4. An adult-oriented business. There are certain business types that most MCA providers simply will not fund. These businesses include (but are not limited to) brand new businesses and adult-themed business (e.g., pornography, etc.).
5. A start-up request. Because this funding normally requires a review of 4-12 months worth of credit sales activity, a start-up will not usually be able to qualify. In many cases, it is best to wait for a full year before applying for a Merchant Cash Advance. It is certainly possible to get funding within your business’ first year, though it may not be as easy as it will be after the first completed year of operation. In addition, it is possible sometimes to use an existing business with a solid track record to fund the start of a new business.

You can find out more about how a Merchant Cash Advance works here.
Wondering exactly what a Merchant Cash Advance is? Get more information here.
Got a more specific question about what stops a deal? Feel free to send it on.

What do you think?
Do you feel you have been stopped or blocked for a deal in the past? Why?

How Much Can You Get From a Merchant Cash Advance?

It varies, but a Merchant Cash Advance typically ranges from $5,000-150,000 per location. It can be more than $150,000, but is not very often less than $5,000.

How much you can get from a Merchant Cash Advance depends a lot on the provider and what the business needs.

For example, since AdvanceMe is a well established industry leader, we have the financial strength to offer Merchant Cash Advances of $2 million or more…but these would be individual cases that don’t represent the norm.

On the other end of the spectrum, if a business only needed a couple hundred or maybe a few thousand dollars, this would typically not be the best financial vehicle to choose because approvals on smaller amounts are low in this industry.

How Can I Estimate How Much I Might Get for My Business?
To get a ballpark idea of how much you could access for your business using a Merchant Cash Advance, start by looking at your gross sales volume and identify the percentage of these sales handled by credit cards every month.

The amount of credit card sales processed monthly is usually a quick indicator of the actual amount you might be able to get from a Merchant Cash Advance. In most cases, a Merchant Cash Advance provider will be able to fund 100%-135% of your monthly credit sales volume. Do be wary of offers that are considerably higher than this amount—though they may be completely legitimate, they are certainly not the norm for this funding.

There are of course other factors to consider, such as what percentage of your total revenue is comprised of credit and debit cards. A higher volume of credit and debit card sales will allow for a larger funding amount, depending on the percentage these sales represent of the business’ total gross sales. Reputable providers establish caps on the amount of your gross sales they will retrieve from your credit card sales. The providers do this to help avoid hurting the business.

But examining the actual dollar amount of monthly credit and debit card sales is usually a good place to start.

Smaller Bites Can Satisfy Larger Needs
Keep in mind that this is an easily renewable source of working capital. So if your business needs $100,000 but your gross sales and credit card volumes only support a Merchant Cash Advance of $20,000, you might consider getting your money in smaller amounts more often. Once you have established a relationship with a provider, you can typically get a Merchant Cash Advance in less than 72 hours…making larger goals achievable despite a smaller sales volume.

In the end, how much you can get from a Merchant Cash Advance depends a lot on the financial strength of the provider and your business’ sales volume—both the gross sales, and the percentage of these sales handled by credit and signature-based debit cards.

What do you think?
Do you think it is better to be able to access a larger amount of money once annually, or be able to get smaller amounts quarterly?