5 Ways to Boost Your Digital Marketing With a Merchant Cash Advance

Updated on:
July 31, 2023

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Digital marketing is one of the most important ways that small businesses can drive growth. It’s a massive industry. Google’s ad revenue has grown literally every single year of this millennium and advertisers are spending less and less on traditional marketing every year, per Statista. Getting the right form of advertisement into the right audience’s hands can be key for your company, and using a merchant cash advance to fund that digital marketing effort can be a synergistic partnership.

What is a Merchant Cash Advance?

First off, you should know what a merchant cash advance is before we consider how it can benefit business owners looking to grow. A merchant cash advance, also known as an MCA, stands in contrast to a traditional loan, specifically because it is not a loan.

Instead, an MCA is a transaction in which the cash advance company effectively buys a portion of your future sales. It’s a key difference that changes everything about repayment, cost, and credit.

In a traditional loan, the lender takes a long look at a business’s credit score, financial statements, tax returns, industry, and organization. If everything looks right, a small business loan (lump sum payment) is deposited into the company’s checking account and the business makes payments on that loan amount, plus interest on whatever principle remains. The interest rate will depend on the lender’s examination of the factors listed previously.

MCA providers base their financing decisions upon a company’s revenue. Traditionally, it looks at credit card and debit card activity to determine your ability to repay the cash advance, because the financing will be paid back as a percentage of future sales. They then assign a factor rate. The factor rate is the premium fee charged for the financing.

A factor rate is a number typically between 1 and 2 which indicates how much money a company must pay over and above the cash advance to its MCA provider. If a company receives $10,000 and a factor rate of 1.2, that company will repay $12,000 by making daily payments of a certain percentage of each credit card transaction.

That small change in the nature of the cash infusion means that MCAs are sometimes very expensive. If you’re able to pay back a term loan quickly, it’s less expensive, since interest is calculated on whatever principle remains. If you pay down that principle quickly, you have less money to pay interest on. However, your factor rate is set in stone. Even if you can repay that $12,000 immediately, you’re still going to pay $2,000 for that money. So, prepaying an MCA will result in a higher effective annual percentage rate since it covers a shorter period of time.

What are the Benefits of MCAs?

Just because they’re expensive it doesn’t mean that a merchant cash advance has no place in the business financing world. There are a few ways in which they’re very helpful.

  1. MCAs are often available to companies with poor credit. Unlike a loan, MCAs largely take into account your credit card sales more than your credit history. So if you’re a startup and have generated considerable revenue but have a limited credit history, a merchant cash advance can be a great option. Even if you’re operating an established company, your business credit score can take a dip now and then. Maybe you’re drawing on a line of credit more than you’d like, or perhaps you’ve taken out a bit more debt than is ideal. Regardless of the reasons for your poor credit, an MCA can help.
  2. They’re very quick. MCAs are available through alternative online lenders, not traditional banks. MCA providers’ limited need for credit examination and online nature means that some MCAs are available as soon as the very next business day after you’ve applied. If you need a rapid infusion of cash to plug a hole in your cash flow or buy a new piece of essential equipment, an MCA can hit your account very quickly, allowing you to make the purchases or repairs your company needs to keep moving forward.
  3. Payments adapt to your cash flow. Because you make daily payments as a function of your credit card transactions, you pay more when you’re making more money and pay less when you’re earning less. In a traditional loan, your monthly payments are what they are. If you had a slow month, those monthly payments can make a significant dent in your working capital.

Disadvantages of an MCA

  1. MCA’s are typically very expensive
  2. Reduced future cash flow. Since you are using a percentage of future revenue to repay the advance, your company will retain less revenue.

What is Digital Marketing?

Every company needs a good marketing strategy as part of its larger business plan. You need to get the word out about new products and ongoing specials, and you need to draw in new customers.

Digital marketing encompasses many different aspects of your online marketing strategy. It involves social media, including Meta, Twitter, Instagram, TikTok, LinkedIn, and more. Digital marketing means utilizing principles of search engine optimization (SEO) so that when your target audience is searching for whatever it is they need, your business is what they find.

On top of that, digital marketing encompasses email marketing, when you can reach out to existing customers, and content marketing, in which you create video, social, or written content in order to drum up conversation and engagement around your product or service.

Digital marketing involves many different facets and forms and requires that the person or people in charge of coordinating your digital marketing strategy understand how their choices impact other aspects of the strategy.

5 Ways A Merchant Cash Advance Can Jumpstart Your Digital Marketing

When considering using a cash advance to boost your digital marketing keep in mind the impact of your efforts on future revenue generation. As discussed, MCAs can be expensive and are repaid using a percentage of future revenue. So, you should be reasonably certain that your marketing efforts will create new revenue or boost existing revenue in a very short period of time.

So how can a merchant cash advance allow you to build your digital marketing footprint? Here are five ways.

Hire a Marketing Team or Agency

MCAs are incredibly flexible. Once you receive your infusion of cash, you’ve got any number of different routes to go, and one smart way to use that boost of capital is to hire someone to handle digital marketing for you. Small business owners have a ton to do every single day. You don’t start a trucking company because you love SEO or e-commerce. By hiring someone who’s built a career in digital marketing, you’re able to completely take that side of the business off your plate, and generate additional revenue.

Better yet, you can even hire a marketing agency that’ll be able to build a synergized digital marketing strategy. All the different aspects of digital marketing can compound on one another and lead to huge growth and incoming web traffic and online sales. These marketing agencies often require a substantial deposit – an excellent use for a merchant cash advance if it generates revenue.

Renovate Your Website

When was the last time you had a critical look at your company’s website? Are you running a restaurant but your website was last updated in 2005, with an outdated aesthetic, no online ordering, and an unprofessional URL?

An MCA can help pay for the design, hosting, domain naming, and building of a brand new website for your company. If you don’t already have an e-commerce side of the business, you can even build an online store for the first time, which can get expensive quickly. Website and domain hosting can cost a pretty penny per month and if you want your company’s website to look and perform as well as it could, you might consider using your merchant cash advance to fund an upgrade to your company’s online capabilities.

Create Long-form Content

You can use money from a merchant cash advance to help create the sort of long-form content that creates value for your customers and potential customers while also driving them toward using your product.

For example, you might want to consider writing an e-book about your company’s area of expertise. You can then offer that e-book as a free gift when a potential customer submits their email address, or include it as an add-on when they make a purchase. You’ll add value for the customer in a tangible way.

Alternatively, you can use MCA money to create a webinar or other form of video content. You can focus that webinar on some aspect of your industry you’re an expert in and then integrate it with your other marketing efforts.

Regardless of which path you choose, taking MCA dollars and turning them into long-form content is a great way to use your creativity and expertise to create value for your customers.

Fund an Email Marketing Strategy

Email marketing is key for small businesses. After all, your email list is essentially the target audience that has already given you their personal information. You’re much more likely to convert a sale with your email list, and using email marketing gets more and more important as the list grows, new products debut, and you have more and more offers to send to people who’ve already proven they’ll spend cash at your company.

But email marketing can be pricy. And jumpstarting an email list can require a hefty promotional period. They require a creative writer, valuable content, and integration with your website. Using a merchant cash advance to fund an email marketing campaign can very quickly pay for itself by creating more conversions and a growing list of valuable repeat customers.

Build a Social Media Following

Social media is a key part of digital marketing. Social media gives you the opportunity to reach new and wide audiences, start conversations, interact with potential customers, and show off the benefits of your business. For just one example, a liquor store’s Instagram page could post pictures of combinations of available ingredients that make unique cocktails, along with a promotional price for buying those ingredients together. Social media can help connect with your target audience on a deeper level than you’ve ever had access to in the past.

However, using social media for marketing can be pricy. Social media management is an industry unto itself, and hiring a social media manager is both pricy and a smart investment. In addition, it’ll cost money to promote your company’s page on these networks in the areas and to the users you’re interested in reaching. All of that money could easily come from a merchant cash advance.

One Last Thought

The important thing to remember is that all the branches of digital marketing can impact each other. Your well-received email campaign can direct people to your attractive and engaging Twitter account. Your awesome blog doing well in search engines can lead to a boost in web traffic to your site. Optimizing all aspects of your digital footprint leads to compounding benefits.

And using a merchant cash advance to fund such optimization is a good use of a sometimes misunderstood alternative funding source. Yes, MCAs can be expensive. But when you’re using one to fuel sustainable growth, they can be an easily-repaid, fast, and effective form of small business funding.

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