A merchant cash advance offers a business owner quick access to capital, but that doesn’t mean it’s always the best option. Let’s take a look at a few instances where an MCA can offer you a solid financial footing, and then we’ll talk about situations where it’s best to look at options other than a merchant cash advance.

Can a merchant cash advance be a smart move? Sure, if:

• You can’t qualify for a traditional loan with a lower interest rate.
• You’re heading into a period of strong sales and know you’ll be able to pay off the advance quickly.
• You need the money to take advantage of an opportunity that will lead to higher sales numbers in the near future.

Maybe you’re running a young business with a track record that’s too short to qualify you for more competitive loans from traditional lenders. Products are flying off the shelves, but you’re still paying off initial startup costs and can’t access the capital you need to replenish your inventory. In this situation, a merchant cash advance could offer you a promising way out because the lump sum will be paid off using a percentage of your reliable sales volume. If the profit margin of each sale is significantly more than the anticipated interest rate, getting a merchant cash advance could help you preserve sales momentum while building cash flow. After you’ve paid off the advance, you’ll hopefully have enough working capital to function—ideally without getting another advance.

Can a merchant cash advance be a bad idea? Absolutely, if:

• You can qualify for a better loan product such as accounts receivable financing or a business line of credit.
• Sales numbers are slipping, and you’re worried they might not bounce back soon.
• You don’t have a solid plan of how to pay off a merchant cash advance as soon as possible.