Running a Seasonal Business? Try a Merchant Cash Advance
Seasonal vendors and retailers have the distinction of being somewhat like school teachers; they are busy during part of the year and slow or at a complete standstill during other times. The slow periods are what make it hard for these businesses to prepare adequately for their seasonal rush. Thankfully, there is a financing tool that most can employ to bring in extra operating cash when its needed. That tool is a merchant cash advance.
You Work Within Seasons
A little bit like a bridge loan, an MCA covers the gap between the financing needed for a product and the actual receipt of the cash from selling it. For example, assume you run a Halloween costume shop. You are going to be very busy during the months of September and October and dormant the rest of the year. How do you get the money to buy the merchandise for this year’s spooky season? With an MCA.
Funding Your Merchandise
If you take a look at your profits over the last several years, you can project about how much you’ll need for this year’s inventory. You have most of it, as you run other ventures and prepare each year for your Halloween shop. You can purchase some inventory, but there’s a costume that’s sure to fly off the shelves this year, so you want to purchase extra of that.
If you approach a lender that offers a merchant cash advance, you may be able to secure the money you need for additional stock without having to pay it back until you sell that stock. This works well for any seasonal business that must order extra inventory or hire temporary personnel to help the company through the added seasonal rush.
Paying the Funding Back
There are two common ways in which you can pay an MCA back. One is through your credit card sales, and the other is by offering up your accounts receivables as collateral for the loan. In this example, you, the retailer, might offer up a percentage of the store’s debit and credit card purchases to the lender daily, weekly, or monthly to pay the MCA back.
A merchant cash advance works with you to give you operating cash right away and a flexible payment plan depending upon the portion of your business you offer up as collateral. This gives seasonal operations quick access to funds they need now but won’t be coming in until the holiday rush is upon them.