Merchant Cash Advance
What is a Merchant Cash Advance (MCA)?
A Merchant Cash Advance (MCA) is a short-term, unsecured business loan typically used to finance business expenses such as inventory, equipment, or working capital. MCAs are repaid through a percentage of the business’s future credit card sales or credit card transactions.
How Does a Merchant Cash Advance Work?
If you are looking for business credit, a merchant cash advance can be a great choice. This is a type of loan that is designed specifically for small business owners. It is a short-term loan that is based on the credit card sales of the business.
The way a MCA works is that the merchant cash advance companies will advance you a certain amount of money based on your daily credit card sales. You will then be responsible for repaying that amount plus interest and fees to the merchant cash advance company. The interest and fees are usually a set percentage of the amount that was advanced to you.
One of the benefits of a MCA is the fact that you can get the money very quickly regardless of business credit profile. In some cases, you can get the money within a few days. This is typically much faster than getting a traditional loan from a bank.
Another key benefit is that you may even be able to get a MCA if you have bad credit.
The downside of a MCA is that the interest rates and fees can be high. You should always compare the interest rates and fees of different merchant cash advance providers before you decide which one is best for you.
What is the Difference Between a Merchant Cash Advance and a Small Business Loan?
The main difference between a MCA and a small business loan or traditional bank loans is that a merchant cash advance is based on future credit and debit card sales. A small business loan, on the other hand, is based on the credit history and assets of the business.
With a MCA, a business owner can typically get the money you need faster, but you may have to pay back a higher interest rate. With a small business loan, you may have to wait longer to get the money into your business bank account, but you may be able to get a lower interest rate.
Pros and Cons of Merchant Cash Advances
A MCA a great way for small businesses to get the money they need to grow, but there are also some risks associated with them. Here are some of the pros and cons of merchant cash advances:
A MCA can provide businesses with the money they need to grow and expand.
They are a quick and easy way to get funding, and there may be no need for a credit check or assessing your business credit history.
A MCA can be a great way to get out of a financial bind.
The interest rates on a MCA can be higher than conventional loans.
Like any loan, if you are unable to make repayments, you could end up defaulting on the loan, which could damage your credit score.
If sales unexpectedly drop, you could end up owing more money than you can afford to pay back.
MCA’s typically have shorter repayment terms than other loans, which means that the total amount of interest paid over the life of the loan will be higher.
How to Qualify for a Merchant Cash Advance
MCAs are a business financing option that can be obtained by businesses of all sizes regardless of credit scores. The qualification process is not as rigorous as with other types of loans, and the approval process is typically quite quick.
In order to qualify for a MCA, a business must demonstrate that it has a healthy credit history and a solid credit score. The business must also demonstrate that it has a consistent stream of revenue, and that it has been in operation for at least six months.
MCAs can be an attractive financing option for businesses that don’t have the collateral or credit history necessary to qualify for a traditional loan.
Cost and Fees of a Merchant Cash Advance
MCAs vary by provider, but typically a MCA will cost between 1-10% of the advance amount, with an average fee of 4-6%. There are no prepayment penalties associated with a MCA.
Look to JVB Financial Group for Your MCA Needs
We understand that small businesses need capital to grow, and our MCA provides businesses with the working capital needed to expand their operations.
We are committed to providing small businesses with the capital they need to grow and succeed. If you are interested in learning more about our merchant cash advance, please contact us today.