WHAT IS A MERCHANT CASH ADVANCE?
A merchant cash advance is not technically a loan. With an MCA, a financing company advances you cash in exchange for a percentage of your daily credit card and debit card sales, plus a fee. Merchant cash advances can be quick, easy ways to get a business cash advance with no need for collateral—even if you don’t have a great credit score.
Maximum Advance Amount – $2.5K – $250K
Repayment – Paid daily via your merchant account
Time to Funding – As little as 2 days
- Quick access to funds
- Easy approval process
- Bad credit is accepted
- Suitable for a wide range of business purposes
- Higher fees than with traditional loans
- Less flexibility to change merchant service providers
- Daily deduction of credit card receipts reduces cash flow
WHO QUALIFIES FOR MERCHANT CASH ADVANCES? WOULD YOUR BUSINESS BE ELIGIBLE FOR A MERCHANT CASH ADVANCE?
If you have little or no collateral, limited business history, or a low credit rating, merchant cash advances could be a solution to your financing problems. Merchant cash advance providers tend to have easy eligibility standards, so most small businesses shouldn’t have a problem qualifying.
Plus… For businesses that make a big portion of their revenue through credit card payments—if you own a restaurant or a retail store, for example—then you can use a merchant cash advance as a short-term financing tool. It can help with working capital, inventory purchases, debt payments, unexpected payments, and more.
Most customers who were approved had
**Based on past Funded customers
Annual Revenue – Over $180K
Credit Score – 500
Time in Business – Over 6 Months
WHAT’S THE COST OF A MERCHANT CASH ADVANCE?
Your funder will not include the typical interest rate that is associated with a business loan. Instead, your funder will apply a factor rate to your merchant cash advance. If you’re unfamiliar with factor rates, you’re not the only one. A factor rate is another way funders add costs to the funds they provide. With a merchant cash advance, the cost of funding is added to your program at the very beginning, unlike interest and APR rates that annualize over time.
To better understand how these rates will affect your total payback, let’s look into a few examples:
MCA Amount Factor Rate Total Payback
$10,000 1.15 $11,500
$50,000 1.18 $59,000
$100,000 1.20 $120,000
As you can see from the table above, factor rates are expressed as a decimal rather than a typical percentage you may be used to. In order to determine your total cost, multiply your factor rate by the total amount of your MCA program.
Factor rates operate much differently compared to interest and APR rates. When searching for funding options, you should understand how each rate functions so you can properly compare the total costs.
Our goal is to find the right funding program that meets your financial needs. Singh’s Capital Group Business Advisors can point you towards the right merchant cash advance to meet your goals.
HOW CAN MY BUSINESS USE A MERCHANT CASH ADVANCE?
MCAs can be used for just about anything and can help you handle any financial hurdle you may encounter. When your business receives an MCA, you can use it any way you see fit to benefit your growth. Consider some of these possible scenarios:
Capital If your business lacks working capital, a merchant cash advance can replenish the funds you need for daily operations. Whether you’re waiting on an invoice payment or dealing with a seasonal lull, an MCA can get you through these unsettling times.
Unexpected expenses can burden your business when you don’t have additional working capital. The speed of a merchant cash advance can quickly tackle those financial hardships you didn’t see coming.
When your business gets the opportunity to fulfill a large purchase order or take on a new client, it can require more capital than you have available. A merchant cash advance can help you access the funds your business needs to grow, without disrupting your cash flow.