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Merchant Cash Advance – Right for Your Business or Not?

A merchant cash advance (MCA) has been surging in popularity in recent years. However, the industry is relatively young and dates back to 1998. The MCA industry was a response to a decline in small business lending from traditional banks. MCA has gone from $0 to $10.7 billion in 2015, and is expected to account for $15.3 billion in 2017.

Getting a Merchant Cash Advance (MCA)

Merchant cash advance companies can advance you a certain amount of cash depending on the amount of your monthly revenue. You agree to pay back that advance and a fee by letting the MCA provider keep a portion of your credit card sales each day until you pay off the advance and the fee.

A merchant cash advance or an upfront sum of cash received in exchange for a slice of your future sales has historically been for businesses with revenues coming primarily from credit and debit card sales. Today, businesses that don’t rely primarily on credit/debit card sales can also get approved for an MCA.

When it comes to your annual percentage rate, it’s the total borrowing cost of your merchant cash advance, including all fees and interest. This figure is also based on how long it takes you to pay back the advance in full.

Is an MCA Right for Your Business?

The industry is largely unregulated, so you can’t trust all the companies offering a merchant cash advance. Reputable alternative online lenders like offer fantastic financing options both to traditional and high risk businesses. First American merchant is an award-winning business funding provider and payment processor that specializes in the high risk industry and has an A+ rating with the BBB.

Even if you have bad credit or a low credit score, you can obtain FAM’s popular cash advance without major difficulties. First American Merchant offers the lowest possible rates and the best terms for a bad credit merchant cash advance.

Borrowers opt for MCAs since:

  • They’re quick
  • Won’t make a borrower lose his/her home
  • When sales are down, the payment may be down too

A merchant cash advance is right for those who:

  • Need funding quickly
  • Have poor credit
  • Have relatively high volumes of daily sales
  • Don’t have collateral
  • Own a controlling share of their company

Together with all the mentioned advantages, you should also take into account the risks and costs associated with merchant cash advances. Be aware that MCAs have higher fees as compared to those offered by traditional bank loans.

In addition, since you’ll be required to give up a percentage of your daily sales, you should be sure your business can thrive on the reduced cash flow for some time. Overall, a merchant cash advance is best suited for businesses that are paid primarily through credit cards.