A Merchant Cash Advance (MCA) can provide business borrowers with an upfront fixed amount of cash in as little as 24 hours. The funding amount is based upon a percentage of the businesses credit card receivables or daily cash balances 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 or cash available plus a percentage which is often referred to as a discount factor. The remittances are drawn from the business customer on a daily, or weekly basis until the obligation has been met. MCA's are good options for small business owners who may not have strong credit but have lots of credit card activity and need financing quickly.
One of the greatest benefits of a Merchant Cash Advance is that the funds can be used for a host of business expenses. There are typically no restrictions on how you choose to use your Merchant Cash Advance, however some of the more typical uses of an MCA include:
- Buying equipment – Could a new computer, desk, telephone, cash register or software come in handy? Money to pay for the purchase of necessary business equipment could help boost your profits. And if this cash isn’t readily available in your account, a Merchant Cash Advance can provide you with these funds.
- Paying employees – Instead of running your business like a one-man show, a few extra hands could really help. Spending borrowed money on employee’s salaries can be the answer rather than disrupting your cash flow to cover this expense.
- Purchasing inventory – One of the most common uses for a Merchant Cash Advance is buying inventory. It takes products in stock to make business profitable, so it only makes sense to invest in enough inventory to make sure you always have enough to sell to clients.
- Expanding the business – If your business is experiencing some success, you might want to start thinking about taking things to the next level. A lump sum of cash might be just what you need to get business booming.
How to know if a Merchant Cash Advance is Right for Your Business?
When does it make sense for a business to use a Merchant Cash Advance? An MCA is an option when a business needs access to capital quickly to take advantage of an opportunity to purchase inventory at a discount, a special marketing opportunity, or other short-term capital need. And, because credit requirements are less stringent, it could be an option for a business that does a lot of credit card transactions, but might have less-than-perfect credit.
Benefits of an MCA
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:
- Much quicker approval times from an MCA provider than a bank. This translates to faster cash-in-hand, allowing you to take advantage of current market prices.
- Whereas business loans require you to have collateral in order to gain favorable consideration, an MCA simply requires you to be subject to a limited amount of conditions.
- A 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 loans.
- 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.
- No UCC-1 is required for an MCA
- A business stands to benefit more from an MCA because of how payments are made. So, if a business’ income slows down, payments are adjusted to reflect this change in income.
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 for more info! (855) 998-5874