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Merchant Cash Advance: What Is It and When Should Your Small Business Use One?

Since the Great Recession, it has been extremely difficult for small business owners and business startups to find traditional lenders willing to work with them. This has made it very challenging for businesses fund growth, and for entrepreneurs to turn their business idea into a reality. Over the last few years, the merchant cash advance (MCA) has become a go-to alternative business funding option – and continues to gain popularity.

What is a merchant cash advance?

Contrary to popular belief, a merchant cash advance – also known as a business cash advance – is not a loan. It is a sale. When your business secures a cash advance, you are selling your future credit and debit card sales (at a discount) in exchange for quick cash. The amount and discount are agreed upon initially by both parties.

In most cases, repayment begins immediately. Depending on the provider, repayment might involve a portion of your ongoing sales or daily debits from your business’ bank account. With First American Merchant, the collections process couldn’t be simpler or more flexible. Repayment is simply a percentage of your business’ daily credit card sales. Thus, during busy months your business pays back more, during slow months it pays back less. Your business secures the cash it needs, while also ensuring it will be able to afford payments.

What are the Advantages of a MCA?

There are many advantages in choosing a merchant cash advance over traditional financing options. Small business loans, for example, involve strict credit requirements, long wait times for funding, complicated contracts and extensive documentation. A merchant cash advance, on the other hand, allows businesses with poor or no credit to secure funding, cash is received in as little as 24 hours, the programs are simple and flexible, and no tax returns or financials are required.

First American Merchant is a high-risk specialist, which means even businesses that struggle to secure funds elsewhere can apply and receive the cash they need. Approval for a cash advance with FAM is based on business performance, rather than personal credit, time in business or financials. Automotive, beauty salon, construction, doctors, dentistry, hotels, retail, trucking, and restaurant are just a few of the “high-risk” business types FAM provides services to.

When to Use a Merchant Cash Advance?

It is critical that a business maintain positive cash-flow. Without sufficient capital, expenses will go unpaid, opportunities will be lost, and growth will come to a screeching halt. The following are just a few of the reasons small business owners choose to use a cash advance:

  • Boost cash-flow
  • Fund plans for growth and expansion
  • Seize opportunities and keep up with the competition
  • Increase inventory and purchase equipment
  • Cover day-to-day costs

If you have been unable to secure the business loan you need to cover expenses and fund growth, consider what a merchant cash advance could do for your business.