Merchant Cash Advances: The Basics

As a small business owner, you probably know by now how hard it is to acquire a business loan from banks. Even when businesses do, it often takes banks a long time to process the loans, which may not always serve their purpose. Merchant Cash Advance is a much easier funding option for businesses.

What is Merchant Cash Advance

Merchant Cash Advance is an alternative funding option for Small and Medium sized businesses. MCA lenders provide businesses with a lump sum in return for future repayments along with some additional costs. Regardless of good credit points or bad, businesses can most times access these advances.

How MCA Works

When you apply for an MCA, the provider will first qualify your business based on certain eligibility criteria. Depending on factors like your credit rating and monthly sales you’ll be able to avail loans from 50% of your monthly sales upto 300%

Most times, a portion of each credit card sales that your company makes will go on to pay back these loans. The agreed upon percentage deducted from each sale is known as holdback.

So the more sales you make, the sooner you’ll pay off your loan.

What are the Best Uses for MCA

Most times MCA doesn’t scrutinize why you need your funding for, considering obviously you’ll use it in lawful terms. Here’s a few ways businesses commonly use MCA –

  • Working Capital 
  • Loan Repayment
  • Payroll Expenses
  • Inventory Purchase
  • Miscellaneous Expenses

Pros

  • Quick Cash
  • Easy Repayment
  • High Credit Rating isn’t necessary
  • Use anyway you like
  • No Collateral Necessary

Cons

  • Comparatively Expensive
  • Doesn’t add to Business Credit records
  • Regular payments may hinder cash flow

How Do Businesses Benefit from MCA

From small businesses struggling to make ends meet to new startups, all businesses benefit from MCA funding. It’s much easier to acquire a Merchant Cash Advance than a bank loan. 

MCA is for all kinds of businesses, regardless of their industry and size – as long as they have a stable flow of credit card transactions.

Many businesses faced dire straits during the pandemic, finding great solace as MCA helped them stay afloat.

Whether it is to meet the payroll accounts, or to buy equipment & equity, businesses benefit in many ways from MCA. 

How to Qualify for Merchant Cash Advance

The qualification process is simple, though it may vary from one MCA provider to the next. The general criteria of qualifying businesses for MCA outline – 

  1. The business must be operational for 6 months – 1 year.
  2. $10000- $15000 sales each month.
  3. No past records of Bankruptcies.
  4. Need working capital within 30 days or less.

There may be additional criteria based on provider’s requirements.

How to Apply

You’ll come across many MCA providers online who will ask of you certain information in their application form. 

Here’s a list of items you’ll have to provide –

  • Name of Company 
  • Address
  • Contact Details
  • Desired Loan Amount 
  • Gross Revenue
  • Operational Years
  • Bank Details
  • Owner’s name and SSN
  • Partner’s Information
  • Business ID
  • Financial Report
  • Bank Statements
  • Tax Return

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