As a suitable alternative to the lengthy process of approval and strict credit requirements for a traditional term loan, a merchant cash advance (MCA) is very useful for generating money. It is based on the months of credit card sales of a business although it is not technically a loan.
As a business owner, you are the recipient of credit cards payments or other sources, including the receivables amount to obtain the advanced funds regularly flowing through the business MCA. As soon as MCA for small business application is approved, you will see how quickly advanced deposits appear in your account.
Merchant cash advance providers are not banks as its main considerations are only the daily receipts of a credit card to determine if the business can settle the advance on time.
Portions of future credit card are sold by small business owners to acquire their capital as soon as possible. Rates from Merchant Cash Advance are often higher compared with other smaller options for business loans.
Even if a business does not qualify for the usual business loan, it can still be approved by the merchant cash advance provider due to the consistent and steady flow of personal credit card payments. Business owners choosing this option should understand thoroughly the offered terms to make an informed decision about potential lump sum from ROI.
The small business and Merchant Cash Advance provider agree on the advance amount, payback and percentage of the hold back. After the agreement, the advance payment is transferred to the bank account of the small business as an exchange for future percentage from receivables or credit card receipts.
A daily percentage of revenues or credit card receipts withheld has been agreed to pay back to the merchant cash advance. Called a “hold-back”, it will continue until the merchant cash advance is paid fully. No collateral is required as a lender has access to a business owner’s merchant account.
Borrowers who use a merchant cash advance pay back around 20%-40% (or more) of the amount borrowed. Frequently displayed the percentage of the factor rate is equivalent to be 1.20 – 1.40.
The holdback percentage is typically based on 3 factors:
Analyze your business and consider MCA as an option when your business needs to access capital quickly.
Unlike other lenders who do not consider creditors with bad debts. Those with bad credit are still accepted, even if their monthly credit card sales are below $500.
So small business loans are approved. It does not require strict credit requirements, complicated contracts, or extensive documentation. Since merchant cash advance is not based on personal credit card transaction, time in business or financials, the approval rate is high.
MCA is not considered a loan as it is a sales transaction. Because they are sales transactions, MCA does not require collateral and is not included in credit reports.
A commercial loan can take weeks or even months to be processed. On the other hand, MCA can be available within the same week that the application is processed.
The application process for a merchant cash advance is not only simple and hassle-free, so is the collection process. A merchant cash advance payback is revenue-based. It follows that when you have lots of monthly activities, your payback amount is more, and when your month is slow, the payback amount will be less. This percentage-based collection policy allows a business to grow.
There are now lots of merchant cash providers so you have to choose the right one.
It’s very fast to get an merchant cash advance approval. Soon after approval, the business could see the funds appearing in their account within days.
Follow these steps:
Considering the multiple benefits of merchant cash advance, it could be your best option to increase capital flow and build a stronger business staunch. So you do not need to approach traditional lenders and do lots of paperwork. Opt for a Merchant Cash Advance to have funds quickly deposited into your account.
There are still some questions that are most likely asked by individuals who still can’t decide as to whether or not they should consider merchant cash advances as one of the best alternative in sustaining a business, especially whenever there are backlogs in your business.
Considering the numerous advantages of merchant cash advance, as it could be your best alternative to expand capital stream and fabricate a more grounded business staunch. So you won’t have to approach conventional moneylenders and do a bunch of desk work. Pick a Merchant Cash Advance to have reserves immediately stored into your record.
Joshua is a financial lawyer who plans on writing a book about his experience on debt collection laws and lending terms and conditions. He is currently one of the senior partners at his law firm but wants to take more time off for his writing.