Merchant cash advances (MCA) are a form of financing that uses future credit card sales as repayment for borrowed money. MCAs can serve as an attractive alternative to business loans with less stringent lending requirements and faster processing/repayment times; they are also generally more expensive than other forms of finance, so the decision about using one ultimately lies with what use your funds will serve and whether your business can afford their repayment terms.
Businesses owners can secure a merchant cash advance by applying online with one of the many providers who provide this form of financing. Lenders will assess each application and may review both personal and business credit to assess eligibility before providing an offer that takes into account credit card sales volume as well as other factors. Merchant cash advance financing solutions are ideal for businesses who struggle to qualify for traditional loan products due to low credit scores or collateral shortage.
Once an MCA loan is approved, lenders typically deposit it directly into your merchant account within 24 hours. Lenders typically allow up to $500,000 or more in an MCA depending on the size and volume of credit card sales processed by your business; you’ll agree to allow the lender to withdraw a percentage of future card sales as repayment; they also charge an “Factor Rate”, which is higher than traditional APR business loans.
Merchant cash advance repayments differ from traditional bank loans in that their payments are calculated as a percentage of future sales instead of being fixed each month, so as to reflect your business’s revenue fluctuations. While this makes repayment more proportionate with sales fluctuations, it could mean you pay more when sales surge and less when they decline.
Merchant cash advance can provide numerous advantages for small businesses. As it does not require collateral, merchant cash advances are an ideal choice without collateral requirements and with much easier approval processes due to minimal credit requirements and quicker approval processes than conventional loans. Finally, their repayment schedule allows it to meet short-term financing needs more easily than conventional loans do.
Although a merchant cash advance Madison AL may be beneficial to many businesses, it’s essential that businesses understand its costs and risks prior to selecting this form of financing. Lenders may change billing practices or holdback amounts without notice, which could negatively impact your ability to repay. It is also advisable to compare its cost with that of alternative funding sources like business lines of credit or term loans before making this choice.