Is Merchant Cash Advance Right For Your Business?

Is Merchant Cash Advance Right For Your Business?

You are a business owner and you need some quick cash for your business. You might have opted for a traditional business loan but it can get rejected. Even worse, you may need to wait for a month. This is where a merchant advance can be of great help.

Well, before you start to ponder on how a merchant cash advance (MCA) can help your business, you should go through the rest of the blog.

What is An MCA?

A merchant cash advance is considered to be an advance and not a loan that is given to a person against future credit card sales receivables.

merchant advances

How MCA Works?

One needs to have a proper understanding of how the merchant advance works. Ideally, an MCA is for those businesses that are on the lookout for some quick finance and their source of revenue is credit and debit card sales.


Repaying the Advance

Unlike the traditional business loans, individuals opting for MCA can repay the amount in different ways. One popular method is to provide a slice of the future credit and debit card sales. Alternatively, one can repay the amount slowly on a weekly or a daily basis from the bank account. This process is known as ACH (Automated Clearing House).

merchant advance

Brokers of MCA are admitting that the latter method of repaying the huge sum of money is getting widely popular. Basically, whatever mode a person chooses to repay the entire merchant advance, one would need to repay the amount till the entire amount is paid off.

The Cost

Depending on the credit card sales receivables, the amount of money that the businesses can obtain vastly depends. However, while deciding the amount, the interest rate is also calculated.

Reason to Opt for It

The reasons behind businesses opting for an MCA are mentioned below. They are:

MCA Pros and Cons

  • In order to get the merchant advance approved, one won’t need to wait for long period of time. The application can take 1 week at the most to get processed.

  • An MCA doesn’t ask for any collateral in order to provide the cash. It sees the business’s daily credit card receipts in order to provide the money. It won’t ask for any deposits.

  • There is no fixed amount of repayment for MCA services. Depending on how well the business is doing, repayment adjustment is made.

However, merchant cash advance comes with certain drawbacks. For instance, if a business is facing greater credit card sales, the annual percentage rate would also increase.  Similarly, the provider of MCA provider can keep the borrowing and interest rate up to 300%. Hence, the repayment structure can be confusing.

With merchant advance being structured as a commercial transaction, it is not subjected to federal regulation. The credit score gets checked by the lender. Last but not the least; individuals don’t get to enjoy any interest savings.

Hopefully, after going through the details you will know it’s good for those businesses who want some quick money. Before taking an MCA, consulting an expert is always advisable.