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In any small business, solid cash flow means the difference between survival and failure.  For specialty retailers, a merchant cash advance can smooth out the peaks and valleys in seasonal sales revenue.

You’re Not Wal-Mart

Large retailers seem to have it made.  They rotate their stock seasonally and always have something to sell.  They don’t need a merchant cash advance; their cash flow is steady.  But, what if you own a ski shop that’s slow all summer?  Or a bike shop without much traffic in the winter?  You still have to pay the rent, the utilities and the insurance.  Every three months, the IRS is going to come knocking on your door wanting your quarterly tax payment.     Unfortunately, the IRS and the utility company won’t take bicycles or skis in payment for taxes or electricity.  They want cash.

Penalties and Interest Add Up Quickly

Making sure that you have enough cash to pay your payroll taxes, sales taxes, and estimated income taxes takes careful planning.  In some states, merchants who miss a sales tax remittance face fines of up to 25% of the tax due.  Missing a Federal 941 payroll tax remittance is serious, indeed; the IRS takes aggressive action and may garnish your checking account.  The specialty retailer who doesn’t stay on top of these taxes will be out of business in short order. 

Frustration at the Bank

Banks like to say that have money to lend, but if you’re a small businessperson you know better.  Banks don’t do inventory or floor-plan financing, so your inventory is no good as collateral.  A merchant cash advance is out of the question; banks won’t do a merchant cash advance.  You may qualify for a business line of credit if you can demonstrate at least two years of profitability, but be prepared to get financially naked in front of the loan officer.  To get a line of credit you’ll have to supply all your financial records and tax returns for up to five years.  For such a loan the bank may also require co-signors, collateral, UCC filings, and direct withdrawals from your checking account to make the payments.  

Think Strategically with a Merchant Cash Advance

You’ve been in business long enough to understand the seasonality of your sales.  You know when sales will peak and when they will bottom out.  You have established a track record with your merchant account and you can pretty well predict what your MC/Visa charges will be from month-to-month.  During your off-season when cash gets tight, why not capitalize on your future credit card receipts with a merchant cash advance?   

Another Tool in your Financial Toolbox

A merchant cash advance is a valuable financial tool that can help your business grow and stay profitable.  The benefits to a Specialty Retailer are:

• Re-payment of the loan is done from credit card receipts; there is no fixed payment.  When sales are down, your payment is low.  When sales are up (and you can afford it) your payment goes up. 
• No fixed repayment term
• No collateral
• Approval not based on your credit score

A merchant cash advance can take the fear and uncertainty out of seasonal sales fluctuations.  Specialty Retailers can benefit from adding this flexible financial tool to their management toolbox.

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