Thursday, December 3, 2009

Is Merchant Cash Advance the Best Way to Raise Cash for Your Business?

Answering this question is the main purpose of our recent White Paper entitled: Merchant Cash Advance: Not for Every Business. Is it Right for Yours? If you have not yet had the chance to read this White Paper, we encourage you to do so.

Different Options for Raising Business Cash
The White Paper identifies three broad areas of capital raising available to most businesses: equity financing, borrowing or leasing, and asset sales. On pages 3 and 4 of the White Paper, detail is offered to explain how each different type of cash-raising effort generally works.

The first step in making better business decisions is to arm yourself with knowledge. You’ll want to clearly understand the nuts-and-bolts of all your potential solutions.

Conduct research to learn how each option works, who provides them, what makes qualification possible, and what commitments are required of you or your business in connection with each option. Understand the potential long-term and short-term effects of each option. Knowing how they work will help you to make the best decision on when they might work best for your business.

You will always be able to make better decisions by increasing your detailed knowledge of the potential solutions to a range of situations your business might face.

Steps Toward Making Better Decisions on Raising Cash for your Business
Ultimately, knowing whether or not an MCA is the right choice for your business’ specific situation depends on comparing an MCA to your other available options and measuring (or estimating) the impact of the features of each option on your business. The following steps should help you in achieving this goal:

  • Research how equity financing, borrowing and leasing, and asset sales could pertain to different situations faced in your business or industry.

  • Build a firm understanding of how each different capital-raising effort works, who provides each one, and what it takes to qualify. Learn more about the potential short and long-term effects of each solution.

  • Talk to colleagues and advisors and refer to trusted industry experts to gain additional insight BEFORE making any important decisions.

You would also want to know very concretely what a “good” use of a Merchant Cash Advance would be when compared to a “bad” use of an MCA. Our next post will continue extracting details from our latest Merchant Cash Advance White Paper, and look a little deeper into these clarifying distinctions.

What do you think? Do you tend to research and understand the far-reaching effects for every potential option when facing a business need?