If you’ve been running your business for any length of time, you’ve probably noticed what a profound impact your cash flow management has on your operation. When your business experiences seasonal slowdowns, this can put a crimp in your working capital. If you set up credit resources in advance, it’s possible to manage short periods like this without needing to modify your business practices. If things persist for longer, though, another solution will be needed, and that’s where merchant cash advances come in.

When you take out an MCA, you’re taking an advance against your merchant account, so the amount available to you is based on the average monthly volume of credit card transactions processed through that account. The more active your credit receipts are during busy periods, the more you have to draw on during slow ones. This lets you get the capital you need to stock up on inventory or do seasonal renovations and site maintenance without compromising on your ability to meet your regular overhead commitments.

The best part is the flexibility they use in determining payment. Most of the time, an MCA’s payment is expressed as a percentage of your credit receipts each month. That makes it easy to meet your other commitments if the business is slow for a little while after the advance, and it also ensures the payoff happens quickly when business booms. The more your volume of business increases, the faster you get it out of the way. It’s also easy to reapply for merchant cash advances when you need another block of capital, so if your business requires large inventory stock-ups to meet periods of high demand, it’s a great resource for accessing that cash.

Used strategically, you can get a more efficient short-term loan from MCAs than from many other forms of financing, but like any financial resource, it takes careful consideration and planning. When your business relies heavily on credit cards and you can reasonably expect a surge in demand, they are at their most cost-effective. Paired with other useful staple tools like business credit cards for petty cash management, they help you access the right credit at the right price every time you need working capital. It’s all a matter of finding the right set of tools for your business, no matter what your income model happens to be. Merchant cash advances are often more cost-effective than unsecured credit, too, because of their use of a business asset as the basis for financing.