Does your business have strong credit card sales? Merchant cash advances, also known as MCAs, are an alternate source of funding for businesses that have strong credit card sales. With MCAs, the business receives a lump sum of cash at the onset of the agreement. The MCA lender then receives a portion of credit card sales each month until the agreement ends.
Would Merchant Cash Advances Work for Your Business?
Here are four reasons why MCAs might be a good choice for your company.
- Requires no credit or collateral. One of the biggest challenges small businesses face is getting funding when it's needed. If the business has no credit established, or a spotty credit history, getting a commercial loan is almost impossible. In those cases where a loan is approved it usually involves securing the loan with collateral. An MCA is an unsecured loan that does not involve credit ratings or collateral.
- Pays the lender when you get paid. You have to make a monthly payment to the MCA lender. It is a percentage of your credit card sales for the month. If you are having a great month with credit card sales, your payment will be higher. If you are having a lean month, the payment will be smaller. This allows you to pay off the loan without draining your working capital.
- Offers an easy application and collection process. Applying for an MCA is fairly simple. The lender will look at two things: how long have you been in business and your average monthly credit card sales. Most lenders require the business to have been up and running for at least 9 months. The average monthly credit card sales should be around $5000 per month, with at least four months considered in the average calculation.
- Provides a quick, safe infusion of cash when it's needed. The initial approval for the MCA usually takes less than 48 hours. The turnaround between getting application approval and the cash advance is usually quite quick. That means you will have the cash you need in just a few days. That will give you the opportunity to buy the inventory to fill that big order. It will give you the cash you need to hire extra staff for the holidays. It will allow you to make that all-important trip to the big industry trade show.
If you need to gain working capital quickly, and have a strong history of credit card sales, merchant cash advances is a funding source to consider. While more expensive than a commercial loan, MCAs offer the flexibility needed by many small businesses.