Benefits of a Merchant Cash Advance for Small Businesses

If your business needs cash quickly and has a readily ascertainable history of credit card receipts, a Merchant Cash Advance "MCA" may provide the funding you require. As one of the top small business finance companies in the country, we can provide up to $1 Million in as little as 24 hours, regardless of credit!

A Merchant Cash Advance facility can provide business borrowers with an upfront fixed amount of cash. The funding amount is based upon a percentage of the businesses credit card receivables using historical credit card receipts and bank statements to determine the initial advance. The business pays back the advance, plus a percentage, often referred to as a discount factor, from a portion of their credit card receivables plus a percentage which is often referred to as a discount factor. The remittances are drawn from the business customer on a daily, weekly or monthly basis until the obligation has been met.

Merchant Cash Advances are available for most businesses that have regular credit and debit card sales. The most popular industries include restaurants, coffee shops, liquor stores, gas stations, retail boutiques, manufacturers and hundreds of other small businesses with a constant need for cash flow. Typically no traditional collateral such as machinery and equipment, real estate or inventory is necessary to secure a cash advance however some providers may look to take a lien on business assets. The personal credit of the business owners is not factored as heavily as it would be for traditional loans. However, depending on the provider a personal guarantee may be required from the business owners.

A business that uses a Merchant Cash Advance will typically pay back 15% – 40% or more of the amount borrowed. This percentage is called the factor rate.

Note: there’s a difference between the hold-back amount that a small business pays every day (as a percentage of their sales receipts) and the repayment amount for the entire advance. There could, for instance, be a hold-back of 15%, and a repayment of 30%, so it’s important for business owners to understand this distinction.

The hold-back percentage is based on:

  • The amount of funds a business receives
  • How long it will take to pay back the money
  • How big the monthly credit card sales are

For Example: A business is advanced $10,000 and agrees to pay back $13,000. This means the payback, or factor rate, is 30%. Moving forward, the business agrees to have 15% of the business’ credit card transactions withheld by the advance company (the hold-back) until the $13,000 is collected. If the business is averaging $14,500 a month in credit card sales, approximately $2,160 would be withheld each month and the advance would be paid back in roughly six months.

In addition to the much easier method of obtaining working capital from an MCA provider than from a bank, the Merchant Cash Advance has a lot of incentives when it comes to small business financing: 

  • You won’t lose your home. MCAs are unsecured loans, so collateral is not required. This means you don’t have to forfeit any personal assets (such as your home) or business assets if your sales plunge and you fail to repay. Businesses that can’t qualify for a bank loan because of collateral requirements typically can qualify for an MCA if they have strong credit card sales.
  • There is no limitation on how the funds acquired from an MCA can be used. Funds that are loaned through a financial institution must be used for the stated purpose by the business. As a result, money from a business loan has a very narrow scope of action as compared to money that comes from a cash advance.
  • They’re quick. One of the biggest advantages of MCAs is that the money can be obtained very quickly — often within a week or so — with no heavy paperwork to slow things down. MCA providers will look at your business’s daily credit card receipts to determine if you can repay the money, so they will likely require that you provide bank statements and credit card receipts during the application process.
  • A business cash advance is also much more beneficial to the cash flow of a company since it does not require any monthly payments or upfront fees that are characteristic of bank loans.
  • When sales are down, your payment is too. Because the repayment schedule is based on a fixed percentage of your sales, repayments adjust based on how well your business is doing. So if sales are lagging, you repay less, giving you more flexibility to manage a slowdown in business

Common uses a Merchant Cash Advance may be used for are: Marketing Campaigns • Payroll • Franchise Fees • Debt Refinance • Leasehold Improvements • Expansion and Remodeling • Furniture and Fixtures • Machinery and Equipment • Inventory • Real Estate Purchase • Licensing Fees • Working Capital

Be on the lookout for other terms often associated with a Merchant Cash Advance: Same Day Small Business Financing, Merchant Cash Advance Loans, Business Cash Advance, Unsecured Business Loans, Merchant Money Advancement, Merchant Cash Financing, No Interest Merchant Loans, Unsecured Business Loans, Business Cash Advances, Merchant Cash Advance Loans, Merchant Cash Advances

Our expert funding advisors are ready to learn about your business needs to determine if a Merchant Cash Advance is right for you and we do so with speed and transparency. Call us toll free at (855) 998-5874 or click the banner below to get funded today!