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Business Operations

Getting the cash to grow

October 11, 2010
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As the saying goes, it takes money to make money. And unfortunately there is no exception to the rule for carwash professionals. Maintaining an edge in the market means constantly discovering new ways to develop your business and satisfy your customers.

Over the years, carwash owners have been upping the ante when it comes to satisfying their customers. Many have sought to differentiate their businesses by expanding services to include everything from dent repair and quick lube to smoothies and pet washes. Others have increased the variety of products for purchase — offering CDs, greeting cards, books and various novelties in addition to the standard car-care products. Some have classed up their waiting rooms with flat-screen televisions, refreshments and other amenities.

Working capital
Regardless of how you plan to woo new carwash customers or bring in extra revenue (see p. 68 for ideas), your business improvements are going to require working capital. Working capital is money that is available to businesses to cover day-to-day operations and other necessary purchases or improvements. As most carwash owners know, having working capital is often a major factor in the success of a business.

So once you’ve identified a need or developed some ideas to maintain or enhance your carwash, how do you get your hands on the working capital required to better your business? A traditional business loan is always an option, but any carwash owner who has endured the loan application process understands that this can be a tedious task, to say the least. Oftentimes you will be required to provide a business plan, collateral, a personal guarantee, and copies of your tax returns and financial statements. Even after all of the paperwork is done, there is a chance you won’t qualify for the loan if your business is new, you have a low credit score, you aren’t asking for enough money or you lack adequate collateral.

A merchant cash advance
For those who want to obtain working capital without the hassle of red tape, a merchant cash advance is an option to explore. With an average approval rating of 80 percent and funds typically dispersed within ten days, a cash advance can be an attractive alternative to the often complex and time-consuming process associated with traditional business loans. You don’t have to have perfect credit to acquire a cash advance, and even businesses that have been open for only six months are still eligible to qualify.

Although merchant cash advance services have been around for many years, their popularity with small and mid-sized businesses has ballooned in recent years as word has gotten out and proprietors have become more informed about this relatively simple financing option. Business owners and financial advisors are very familiar with the regular sale of financial assets, including mortgages, automobile contracts and accounts receivable among others. Obtaining a cash advance is just another example of such a sale. Cash advance providers simply purchase a portion of your future credit card receivables at a discounted rate.

How a merchant cash advance works
A merchant cash advance is not a loan. Rather than lending you money, the cash advance company buys a fixed share of your future credit card transactions. And unlike a traditional loan, the business owner is not personally liable for repayment, except in the event of fraud or a breach of contract. There are no liens or collateral requirements, no business-use restrictions, and no set pay-back period or minimum payment amount.

The payback process is simple and requires no guesswork or paper tracking. The cash advance provider simply receives a fixed percentage of all Visa and MasterCard credit transactions until the arranged agreement is fulfilled. The payment is automatically transferred to the cash advance provider each time a credit card transaction is made, and repayment ceases once the contract obligation has been satisfied.

Because the cash advance provider is only paid when a sale is made, repayment follows the revenue trend of the merchant’s business. In an industry whose success relies so heavily on unpredictable weather, this is one of the most appealing aspects of the cash advance. Not only does it promote healthy cash flow within the business, but it ensures that payments are not a burden during periods of slow growth or sluggish sales.

Is a merchant cash advance right for you?
Whether you need money to pay off debt, expand your staff or improve your carwash equipment, a merchant cash advance may be the answer if you’re looking for rapid access to funds. Although requirements vary slightly among providers, most applicants will be approved for an advance. A quick review of the following criteria can help you assess whether a merchant cash advance is right for you.

You are likely to qualify for a merchant cash advance if:
  • Your carwash business has been accepting Visa or MasterCard transactions for at least six months;
  • You have a monthly Visa or MasterCard sales volume of at least $2,500;
  • You have no unresolved bankruptcies; and
  • You have at least one year remaining on your current business lease.
As discussed, working capital is an essential tool for business growth and development. When you need funding to achieve your business goals and you don’t have the time or the credit history you need to obtain a traditional business loan, a merchant cash advance is an attractive option. As you decide whether a merchant cash advance is an appropriate solution for your carwash business goals, be sure to consult a cash advance provider for help in determining a plan that best suits your needs.


Jeremy Brown is President and COO of RapidAdvance (www.rapidadvance.com), a company that offers businesses cash advances to small and mid-size business owners in the United States and Canada.