Merchant Cash Advance (MCA) is an easy and quick way in which small and midsize business owners that lack collateral or have a low credit score to qualify for a conventional bank loan can obtain an upfront sum of cash. The borrower will then repay with a percentage of future credit and debit card sales processed through the business’ merchant account.
In reality, an MCA is not a business loan–it is a lump-sum of money provided by the lender in exchange for a percentage of the business’ future revenues.
A Cash Advance is an excellent alternative for any business owner with a low credit score (FICO) because it is a short-term loan that requires no collateral. Also, if you need working capital instantly, the approval process is faster than any other loan.
As a business owner, I’m sure you recognize the importance of having money available in case it is needed. If you have to make urgent reparations or buy new equipment that will make your job easier and increase your revenue, then you’re going to need some capital to cover those expenses. If you have the money, excellent, but, what if you don’t?
The first thing that comes to mind would be getting a loan from the bank. However, banks are denying loans to businesses in our industry, leaving owners frustrated and with no options. Securing financing for your company should not be hard, especially if you are facing problems that could threaten your business.
Luckily, alternative lending institutions have loan programs made for business owners that could use some extra funds to enhance the performance of their business.
While a cash advance is not technically a loan, an MCA is perhaps the quickest and easiest way to obtain working capital for your business.
When you get a cash advance, the lender will give you a lump sum of cash in exchange for a percentage of your future debit or credit card sales. Then, the loan can be repaid by automatically debiting the agreed amount daily or weekly from your business’ merchant account.
Before the MCA lender transfers the funds into your account, he or she will provide a detailed loan agreement form showing the advance amount, the amount you are expected to pay back, and the loan term.
Opposed to fixed payments loans, in a cash advance, the agreed amount is automatically deducted from the daily sales generated on your merchant account until the advance is paid off.