Sometimes, as a small business owner, there just isn’t enough available cash. Businesses that may not qualify for traditional bank loans or quickly need cash generally use an MCA.
What is an MCA?
An MCA isn’t the same as a traditional small business loan. Rather, it has traditionally been an advance—an upfront amount of cash. Against future credit card sales applied to businesses that generate their revenue largely from credit card sales. Now, however, merchant cash advances can be available to other businesses as an advance against their future revenues.
Cover unexpected expenses and pay for a range of things including purchasing inventory, hiring new employees, buying new equipment, and ramping up for a seasonal surge.
How Does an MCA Work?
A business simply gets an upfront amount of cash in exchange for a portion of credit/debit card sales or other revenues. Then, compared with a traditional loan where a fixed payment is made against a loan each month, in an MCA, weekly draws are made against the advance using a factor rate based on the risk assessment of the cash advance. Payments can be made as a percentage of card sales or by using fixed daily withdrawals against estimated monthly revenues.
Pros of an MCA are:
Speed. MCAs offer the benefits of the fast application, processing, and funding.
More lenient qualifications. Instead of focusing on a credit score and collateral, as with a bank loan, MCA providers focus on credit card statements or a business’s revenue history.
Flexible payment schedule.
High borrowing limits based on card sales or revenues.
No collateral is required.
They don’t build credit.
There is no prepayment incentive.
MCAs may be difficult to budget due to fluctuating payments.
There is the potential for high-interest rates.
Seek Expert Funding Assistance
Contact Triport Lending, to get the funding you need from a trusted commercial finance company. We offer a wide range of financial solutions.