Some consider Merchant Cash Advance as an easy way to get fast money to fund their business.
A merchant cash advance (also known as MCA) offers an advance against future sales. It is generally available to businesses which have a good volume of credit card sales and includes retail stores, restaurants and medical offices.
The documents that you will need to apply for this usually include: proof of identity, bank and credit card processing statements, business tax returns and bank statements. It is always good to know your credit card scores as lenders may run a soft credit check against the owners personal credit.
The amount of money which you can get from a MCA usually ranges from a few thousand to over 200 000. You should always bear in mind that the pay-check time is usually short and tends to be 18 months or less. In order to pay the money back, the lender will usually take a percentage of the sales on a daily basis. Repayments come out of your connected merchant account and are usually based on sales which are proceeded through credit or debit card cash register sales. Cash and cheque sales do not count.
Some advantages of Merchant Cash Advance:
- It allows you to have fast money.
- It is not difficult to qualify for.
- It does not require any collateral
- It has flexible credit score requirements
- It allows for flexible payments.
- It can be used for whatever you want.
- Some Disadvantages of Merchant Cash Advance
- It is based upon factor rates and not interest rates.
- It can lead to potential cash-flow problems.
It might lead you into a situation where you will have to change merchant processors.
An MCA could be a good option for businesses which need cash quickly. It will however never be as cheap as a bank loan. Those with good credit and who have been in business for more than two years will want to apply for other financing options such as a bank loan.