Merchant Cash Advance
Merchant Cash Advance
Business opportunities through flexible funding.
What is a Merchant Cash Advance?
A merchant cash advance (sometimes called a merchant loan) is an advance on future sales that functions as working capital as you get your small business up and running.
Merchant loans are great due to the fact that they are easy to get approved for and have a quick turnaround time. More and more small businesses are turning to these types of loans for this reason as traditional bank loans can be a little more difficult to acquire for up and coming businesses.
How does a Merchant Cash Advance Work?
Once approved for an MCA and you accept an offer, you will receive a lump sum. You can pay it back by automatically deducting a percentage of your credit card or debit card sales. The percentage can range from 5% and up depending on the amount of your advance, the repayment period, and the rate of your credit card sales. Repayment terms can be as long as 18 months or as little as 90 days and it begins once you receive the funds.
The size of your advance depends on your company’s average credit card sales. Lenders generally give up to 50% to 250% of your credit card transactions. But first, they have to see your credit card sales over the past three to six months in order to determine how much you’re eligible for.
What are the Benefits of a Merchant Cash Advance?
Quick funding: MCAs can provide businesses with cash quickly, often within a few days, making them a good option for businesses that need funding fast.
Easy to qualify for: MCAs are often easier to qualify for than traditional business loans, as they are based on a business’s credit card sales rather than its credit score.
Flexible repayment: MCAs are repaid through a percentage of a business’s daily credit card sales, which can be beneficial for businesses with fluctuating cash flow.
No collateral required: MCAs typically do not require collateral, which can be beneficial for businesses that do not have assets to put up as collateral for a loan.
Can be used for any purpose: MCAs can be used for any purpose, including working capital, inventory, or expansion.
How is a merchant cash advance repaid?
A merchant cash advance (MCA) is repaid by automatically deducting a small percentage of the business’s daily credit card sales until the advance, plus fees, is fully repaid. This repayment method is known as a “holdback” or “split funding” and is based on the merchant’s credit card sales volume. This means that the repayment amount can fluctuate based on the business’s sales, and the repayment period can be shorter or longer depending on the business’s sales volume. Some MCA providers also have a minimum daily repayment amount, regardless of the sales volume.
Who Qualifies for a Merchant Cash Advance?
If you need quick access to working capital and most of your sales are paid through credit cards, then you can use a merchant cash advance to finance short-term needs. You can use it to pay for unforeseen business expenses, debt, inventory purchases, and as additional working capital.
It’s also a great option for companies that don’t qualify for traditional business loans. Those have little or no collateral; bad credit scores, and limited business history. Lenders offering a merchant cash advance make it easier for small business owners to apply and get approved.