Give us a call for more info 1-800-210-5649
Skip to content

The Ins and Outs of Merchant Cash Advances

MCAs offer SMEs a quick business financing alternative, something different than what veteran banking institutions offer.

With cash advances, a funding company gives a retailer an amount, which they utilize for their business needs and settle with a predetermined percentage of their per-day sales.

This new-age product is appropriate for micro-businesses that;

  • Take credit card payments, cash, and check payments. It is NOT suitable for retailers who use invoices.
  • Record high sales
  • Are seeking instant financing
  • Won’t be verified for bank funding

How it Works

MCAs offer finances to microbusinesses in trade for a portion (%) of the company’s daily credit card sales over a period of time. The cash provider automatically takes away the agreed-upon percentage off the company’s per-day credit card sales.

The total sum of to be paid back is worked out by a “factor rate,” which varies depending on the company’s financial status. The factor rate is multiplied by the advance amount to get the full amount the retailer is to repay.

The percentage only determines what is remitted daily to reach the total payback amount within the agreed amount of time.

Features of Cash Advances 

MCAs typically have the following features;

  • They offer microbusinesses quick and easy financing instantly.
  • Hassle-free application
  • Acceptance in 24 hours.
  • Acceptance rates are high.
  • Finances are available 24 to 48 hours.
  • They do not require collateral.

But retailers must be warned of the downsides of this alternative method of financing. MCA’s are more expensive than a bank loan.

Many times they are as expensive as 20 to 50 percent of the advance amount.

Furthermore, there are no national or state provisions in the law books controlling Merchant cash advance services. These types of financing are considered commercial transactions and are, therefore, not subject to the laws that regulate small business loans.

That is to say; many bad players exist with exorbitant rates and terms that can threaten to ruin your bottom line. No wonder business owners must work out the full cost of a deal to see if taking an MCA is a good idea or not. They must also compare lenders to choose legitimate providers.

Qualifying for an MCA

Getting a cash advance is comparatively easy compared to other forms of financing. Application and underwriting processes differ in the following ways;

  • Simple online application
  • Fast response
  • Applicants must not have years of experience in business to qualify
  • No credit checks

Most cash advance providers typically check whether a company has a record of high per-day sales. However, whether a business gets an MCA or not depends solely on their lender’s judgment.

Any cash advance company that trusts in a business’s potential to pay back will accept it.

Lastly, most finance companies will ask you to submit a photo ID, business bank account statements, business tax returns, bank account statements, credit card processing statements.

Final Words

Merchant cash advances can help you get the money you need to respond to unplanned-for business needs. Seeking finances from a legitimate provider will ensure you get favorable terms.