Introduction to Merchant Cash Advances

If your small business needs immediate access to capital to fund your day to day operations, an MCA or Merchant Cash Advance may be just the solution you need. Also called Business Cash Advance, an MCS is designed specifically for merchants, and features flexible repayment terms.
The common requirements for traditional loans like impressive financial statements and excellent credit rating are not mandatory to be eligible for a Merchant Cash Advance.
The payments for your MCA are not fixed, and will depend on your daily credit card sales. Thus, you will only pay for what your cash flow can accommodate every month.

While it is intended to be a short-term option, a merchant cash advance will not become more costly if your sales take a nosedive for the meantime. This is what makes the Merchant Cash Advance attractive to small businesses that struggle to meet fixed payment schedules that come with traditional types of business loan.


A Merchant Cash Advance Explained
Also commonly called “Credit Card Factoring” or “Business Cash Advance,” an MCA or Merchant Cash Advance is a type of financing option for business owners.

By availing of an MCA, you will get a lump sum amount to be repaid through a fixed percentage of your daily credit card sales in the future. This is called the Holdback Rate. Repayments will be automatically deducted every day, the size of which fluctuates, depending on the volume of your credit and debit card sales.

It is easier to qualify for an MCA, unlike other small business loan solutions. You may benefit from this option even if you have a poor business credit history, little collateral to put up, or unimpressive FICO credit score.

The amount of cash advance you will be eligible for from MCA companies will depend on the projected amount of your future credit card AR or the sales you generate from customers that pay via credit card.

With this type of business financing agreement, you will receive a discounted lump sum amount in exchange for the future proceeds of your credit card sales. You will get the funds from the MCA provider almost immediately instead of waiting for weeks, and sometimes months to receive the full amount due from your credit card processing company. The process is also called an “advance” on your expected credit card sales.

How a Merchant Cash Advance Works
When you obtain funds from a Merchant Cash Advance, you’ll be required to pay a minimum amount, aside from the interest, similar to how business credit cards work. Depending on your lender, the first payment may be due on the following week, at month-end or the end of the billing cycle.

If you pay back your debt on time, your line of credit will be replenished. Let’s say, for instance, your monthly payment due is $400, and your interest is $20. If your pay $400, your credit line will go back up by $380 (400 – 20). The amount of interest will depend on how soon you can pay off the entire balance.

We specialize in facilitating Merchant Cash Advance applications for businesses. Get in touch with us today for a free consultations session on how you can avail of your Merchant Cash Advance