From the blog Using Merchant Cash Advances to Open a Second Store
If you’re considering opening a second store, you’re probably knee-deep in budgeting for the expansion. Even if your business is doing well, opening a new location is no small thing. How do you pay for that?
A merchant cash advance (MCA) may be the answer. This quick, easy funding option has grown in popularity in recent years for good reason. Traditional small business loans are harder to get.
A merchant cash advance could be a good fit for your business if you meet the following four criteria:
- You’ve been doing business with your merchant services provider for at least 4 month
- A high percentage of your business is conducted via credit card sales
- You need a relatively small amount of capital
- The cash advance will drive immediate revenue
Because your merchant services provider already knows your business and its history, they usually feel more comfortable approving you for an advance.
How Cash Advances Work
A merchant cash advance is a quick way to gain access to capital. Here’s how it works. You the capital you need for your expansion now and you pay it back through future credit card receivables.
This is a great option for several reasons. Repayment is easy and happens as you turn a profit. Plus, this type of funding is not a business loan and does not show as debt or a loan on your credit.
An MCA has an agreed-upon repayment period that usually lasts from three to 12 months. The higher your credit card sales, the quicker you can repay your merchant cash advance.
Businesses like restaurants and retail shops are ideal candidates for a merchant cash advance because the majority of their revenue comes from credit card sales. If you expect your second store to generate revenue quickly via credit card transactions, an MCA might be right for your business expansion.
Benefits of Merchant Cash Advances
Working with a merchant services provider like Talus Pay can make getting capital for your second store easier. MCAs are particularly beneficial for businesses with a strong credit card sales history, even if you have difficulty qualifying for business loans.
MCA perks often include:
- No application fees, hidden fees or closing costs
- A simple, one-page application with no financial statements required
- Quick approval – typically in 24-48 hours
- No impact on your credit report as debt or a loan
- The flexibility of repayment based on credit card sales
Best Ways to Use a Merchant Cash Advance
Now that you know how a merchant cash advance works, let’s explore some of the ways you can use a quick influx of cash to support opening a second store.
While there are quite a few essential expenses that come with expanding your business, there’s also some good news. The boost to your revenue should fuel your MCA payback.
You’ll need to stock your new location to get up and running. An MCA can be used to purchase these items upfront.
Lance Eubanks, the owner of Greenway Express Carwash, says “I recommend using a merchant cash advance to purchase products for your new shop because as you sell them, you’ll immediately pay back your advance.”
Merchant cash advances can also be helpful for purchasing equipment—especially equipment that will immediately drive revenue.
For example, auto repair shops need lifts. That essential purchase will allow them to increase the number of cars they can service which boosts revenue.
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You can’t open a new location without actually preparing the retail space your second location will operate in. An MCA can provide you with the cash on hand to fund materials and labor.
Fast-track your make-ready so you can see quick ROI.
Eubanks also believes a cash advance can be helpful to cover payroll when you’re opening a second location.
“You’ll be training new people and spending extra money on payroll while you ramp up your revenue,” he explained. “It can be a relief to have some of your additional payroll funding covered by a cash advance.”
The process of opening a second location will need additional funding and could leave you, at first, with more expenses as you figure out the P&L. In preparation for this expansion, you may want to consolidate some business debt as you make adjustments to your budget.
A MCA gives you an easy way to accomplish just that. Plus, repayment arrangements are then tied to your profitability. You’ll pay off that business debt little by little with each and every transaction.
Marketing and Advertising
Your business may already have a solid marketing budget, but opening a second store often means extra advertising expenses. When you consider the additional costs—everything from printing and ads to a video to announce the new location—a merchant cash advance can come in handy.
This is an easy way to cover the costs of getting the word out.
Do You Qualify?
The criteria for a merchant cash advance from Talus Pay is straightforward. You need to have a minimum of one year of business under your belt, your average monthly credit card processing should be at least $2,000, and you must batch out at least 10 days a month.
If you’re ready to find out if your business is a good fit for a Talus Pay merchant cash advance, reach out to a member of our consulting team today. We’re here to help your business grow, and an MCA can go a long way to making you more successful..
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