Your Guide To Merchant Cash Advances
A merchant cash advance (MCA) is one of the alternative funding solutions for your business. It is a fairly fast and convenient way of getting funds when you don’t have the time to wait for lengthy loan approval processes. This article will help you in grasping a better understanding on what an MCA entails, why it is beneficial and when to apply for one.
Merchant Cash Advance Definition
A MCA is an advance given to businesses based on the credit card income. Basically, as a business owner you will be given funds and you will then make payments from your debit and credit card sales. The financial provider examines the number of credit card payments you process within the year when determining how much they should give you.
How Merchant Cash Advance Works
Unlike loans, the process of getting a merchant cash advance is very easy and the advance will be availed immediately after you agree on the amount and the payment terms. As stated above, the financier will evaluate your credit card receipts to determine the loan amount. Some providers will also do a credit check before the advance is issued. You will still qualify for an advance with a bad score, but the financier may use that to negotiate for a higher percentage of the daily income. Once the advance is given, the provider will take the agreed percentage from your credit card receipts until the full amount is paid. This percentage is usually referred to as the holdback.
The percentage will be paid straight from your merchant account and this makes the payment process very convenient. You don’t have to worry about getting late with your payments.
Benefits of Merchant Cash Advance
Merchant cash advance has five key advantages. One, the advance is fast and easy to acquire and thus a big life saver when you have cash flow problems. Lending Express provides a merchant cash advance to businesses within 24 hours. The application process takes a few minutes and you will have the money to solve your company’s issues by the next day. Two, you don’t need to fill in a lot of paperwork or meet numerous requirement.
Three, funds are deducted based on daily credit card receipts. This means that when you earn less, the holdback amount will be small, and when you earn more, the financier will take a higher amount. Such a payment is an advantage because it ensures that all your earnings don’t go into paying the advance when your sales are down. Additionally, it enables you to pay your full amount faster when you are making more sales. Four, you don’t need collateral for the advance. Finally, an MCA will not affect your credit score since it is not a loan.
While a merchant advance gives you a quick fix, note that it comes with a cost and thus you should get it only when you need it. The best time to get one is when you have a business problem that needs a quick resolution. Before you take the advance, check the value it will add to your business and how the holdback will affect your cash flow, and be wary of cash advance addictions.