Merchant Cash Advance for a Sole Proprietor
Owning a sole proprietorship has its advantages and disadvantages. As the sole proprietor of a business, a sole proprietorship has the authority to make any and all decisions related to the business; from the type of business to open, to the location of the business, the name of the business, and any other decision that needs to be made.
But owning a sole business also puts the business owner personally at risk. In addition to receiving all profits from the business, a sole proprietor also receives all losses and bears all risks of the business, which according to the Canada Revenue Agency, even extends to the owner’s personal assets, as a sole proprietor does not have a separate legal status of your business.
These facts make applying for a business loan a very risky undertaking for a sole proprietor, considering that if the business fails, its owner may be liable for repayment of the loan and his or her own personal property may be seized.
Acquiring business financing through a business cash advance virtually eliminates this problem. A merchant cash advance is a great option for a sole proprietor who doesn’t want to put extra strain on their personal assets. This is because even though the business and its owner may not have separate legal status, merchant cash advance lenders have found a way to make only the business responsible for repaying the loan.
You may wonder, “How can they do this?” It’s simple, instead of requiring a business owner to make loan payments, merchant cash advance lenders rely on credit card purchases processed by the business to make loan payments. I still don’t understand, consider this example:
Sarah is the sole owner of Sarah’s Cookie Shop. She has seen an unexpected increase in sales and is finding it difficult to keep up with the customer demand for her. She realizes that she can solve her problem by making larger batches at a time. But unfortunately, she doesn’t have the equipment to support the batch increase. She decides to invest in an industrial oven and a food mixer, but after pricing the items, she is about $10,000 short. She does not want to take out a bank loan because she is not willing to put her personal assets as warranty.
Sarah decides to get a business cash advance. After she completes an application, submits the requested documentation, and is approved, $10,000 is deposited into her bank account. During the process, the merchant cash advance lender informed Sarah that based on her previous month’s credit card sales and the loan amount she would receive, only 20% of her future credit card sales would be deducted. as repayment of your merchant cash advance. . Now, every time customers make credit card purchases at Sarah’s Cookie Shop, a small percentage of the sale is deducted and goes toward reimbursing her business cash advance. Whether Sarah processes $5,000 in credit card sales on any given day, or $500, only 20% of her credit card sales go toward payment, keeping her loan payments on track of the business.
Sarah did not have to provide any collateral and feels secure knowing that her personal property is safe. And with the additional increase in sales that Sarah’s Cookie Shop has seen since Sarah’s equipment purchases, her business cash advance is paying off faster than she expected.
If you own a sole proprietorship, you can also find financing for your business without worrying about the safety of your property. A business cash advance can provide between $5,000 and $500,000 in funds for the advancement of your sole proprietorship.