If you’re a business owner, you know that cash flow plays an important role in maintaining inventory, paying your suppliers, and the growth of your business. For one reason or another, businesses are looking past traditional financing solutions when they seek additional funds. The new solution: merchant cash advance.
A merchant cash advance (or MCA for short) offers a source of funding to business owners and entrepreneurs who lack the proper credit or collateral to obtain a traditional bank loan. Unlike a loan, this type of funding is the purchase of a portion of your company’s future credit card sales at a discount. The business obtaining the funding benefit from a lump sum paid at the outset of the agreement. In return, the MCA provider purchases the right to retrieve a portion of the business’s credit card sales each month, typically somewhere around eight percent.
Benefits of using this type of financing include:
- No Credit or Collateral at Stake. A merchant cash advance is a safe approach to accessing cash. Whereas commercial loans can affect a business credit rating, a merchant cash advance is a sales transaction and therefore stays off the credit report.
- Easy Application and Collections Process. Merchant cash advance funding is a painless, straightforward process from start to finish. Commercial lenders evaluate financial statements, tax returns, and business plans. Merchant cash advance providers consider only two simple criteria: monthly credit card returns and length of time in business.
- Quick Access to Cash. Because there is so little paperwork to process, merchant cash advances offer a fast turnaround. While commercial loans can take weeks or even months to process, MCA funding is typically available within a week of submitting the application.
- High Approval Rate. MCAs rely on real business performance rather than credit to evaluate applicants. This pragmatic approach allows any stable business to qualify for an advance.
Commercial loans are a valuable source of long-term, low-interest business funding. But when a merchant needs a quick, safe cash infusion, cash advances offer an attractive alternative. Since the MCA provider collects only a percentage of returns, businesses avoid the pain of default during the inevitable sales lulls. Merchant cash advances offer businesses the flexibility to negotiate the ups and downs of today’s dynamic economy.