The inflation rate in the United States is tremendously high at the moment; a staggering 7.5 percent. Small businesses have been forced to cope with the rising costs of goods and services caused by the pandemic. To counteract the increase in overhead costs, small companies have increased their prices, downsized staff, relocated and taken out loans. It may seem counterproductive to borrow money when a small business does not have much to spare. But investing in a merchant cash advance can actually offer a strong advantage to business during these tough financial times. 

Merchant Cash Advance vs. Loans

            To put it simply, merchant cash advances are not loans. When a small business owner takes out a loan, they are borrowing money from their lender which they are then required to pay back over a set period of time, with interest. A cash advance is repaid through the merchant account credit card sales with no interest. 

 Why Merchant Cash Advances are Useful for Small Businesses

  • Cash advances can be acquired very quickly-sometimes in a matter of hours. For a small business, every minute counts and to have an influx of cash, fast is invaluable. 
  • There is no interest rate, only a small service fee which is calculated based on the advance amount and overall risk. This means that a small business does not have to reserve extra funds to repay the interest, which they would be required to with a loan.
  • Cash advances are taken directly from a percentage of  the merchant’s credit card sales which means there is no worry. Since it is calculated with a fixed rate, it can fluctuate based on how well sales are doing at that point in time. 

How Merchant Cash Advances Can Help Combat Inflation

            There are a number of ways in which a merchant cash advance can be used to assist small businesses in handling their rising overhead costs.

  • Invest in restructuring and optimizing processes: this can mean purchasing new equipment, investing in e-commerce software, or hiring a manual worker. The cash advance can be used to streamline the day to day operations of the businesses. This will not only improve productivity but can accelerate manufacturing and sales.
  • Restock materials when prices are low: an influx of cash can help a small business purchase a surplus of supplies when the price has decreased. This will help business owners keep their prices low and their customers happy.
  • Invest in increasing company sales: inflation opens up the possibility to reach new customer markets as people are looking for new opportunities. Use the cash advance to invest in advertisements, a sales representative or expand to other markets. 
  • Lower your prices: instead of raising costs to oppose the high overhead expenses, use the extra money to lower prices. This will attract customers and eliminate the competition.

            Small businesses have had to work incredibly hard to keep their companies afloat the past few years. It’s time to take a step back and invest some extra money in your product. Call our offices today to take back your businesses.