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.
MCA 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 holdback. 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 MCA. Called a “holdback”, 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.
There are many benefits from MCA:
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 MCA, 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.
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.