Merchant Cash Advance Is An Option For Small Business Owners

Small business owners have limited access to cash these days, due in part to the tight economy and restrictive lending standards. Small Business Administration loan volumes have fallen off sharply because banks are no longer willing to take any risk associated with new business ventures.

Small business owners are running out of options to secure cash. Some entrepreneurs are even looking at their 401(k) accounts as a source for the cash they desperately need. While 401(k) loans are billed as a great option, they come with some disadvantages, too.

First, you can withdraw up to 50% of your vested balance, with a cap of $50,000. The interest rates on the loans are currently low – 1 percent over prime – and the fees are minimal. That all sounds good.

Unfortunately, when you take the funds from your 401(k) plan, you damage the fund’s ability to accrue additional gains on the principal - the smaller the principal, the smaller the return. You may be paying back the loan with interest, but it’s very likely that the investment income those funds can generate is greater than the interest you’ll be paying back. Your 401(k) money is basically out of commission until it’s returned.

Also, if you start skipping payments on your 401(k) loan (a likelihood you should at least consider if you’re short on cash), after a 90-day hiatus on payments, your withdrawal converts to an unqualified distribution and will be subject to income taxes and a penalty of 10 percent. That means you’ll need to come up with extra payments when you file your taxes in the year you take the distribution.

A better approach might be to take a merchant cash advance from Rapid Capital Funding. A merchant cash advance allows you to get the cash you need now and pay it back with future credit card sales by your business. If your business is registered in the US, accepts Visa or MasterCard and takes in at least $2,500 in credit and debit receipts each month, you likely qualify for a merchant cash advance.

Merchant cash advances aren’t like loans. There are no monthly payments to make and the process of obtaining a cash advance is much simpler and shorter than applying for a loan. There is no collateral to put up, and we don’t require personal guarantees. Simply fill out the application form and if you qualify (95% of applicants do), you can have the cash you need in hours or days, rather than weeks or months.

Contact Rapid Capital Funding today to see if you qualify for a merchant cash advance.

Photo Credit: Mike Licht

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