Merchant Cash Advance
Merchant Cash Advance (MCA) is an increasing popular form of small business financing in which the MCA company makes a payment to a small business in exchange for a percentage of future credit card and debit card receipts. Essentially, merchant cash advances are a discounted sale of a retailer's future credit card sales. For instance, a restaurant might sell $25,000 of its future credit card sales for a $20,000 advance from an MCA company.
The money can be used for variety of purposes, new equipment, inventory purchases, marketing, or working capital. Loans amounts range from $5,000 to $150,000, and decisions can be made in just 24 hours. Speed is a big advantage in this form of financing.
A number of lenders in the Biz2Credit network are MCA companies. They are particularly helpful to merchants who do not have collateral and who do not qualify for traditional small business loans from banks or credit unions. MCA financers look at the retailer's revenue and performance, rather than the small business owner's personal credit scores. This form of small business finance has become increasingly popular among retail companies.
After the initial payment is made, the merchant pays back by giving the MCA company a previously agreed upon amount of the its credit card and debit card income. Payments are made on a daily basis until the financial obligation has been met.
MCA providers typically charge interest rates that are higher than a traditional bank loan but lower than a credit card's APR. Payments fluctuate directly with the retailer's sales volume, which provides flexibility for merchants to manage their cash flows during slow periods.
Facts and Figures About Merchant Cash Advance
1. What Is Merchant Cash Advance (MCA) funding?
2. What are the advantages of Merchant Cash Advance?
- This type of funding provides capital quickly at a time when a small business might need it to complete a deal, pay an unexpected bill, or simply to have working capital on hand.
- There are no fixed monthly payments. Rather, a percentage of future credit card receipts are given to the MCA firm until the amount of money provided in advance is repaid.
- Payment schedules are tied to the success of the merchant's sales, rather than a calendar's timetable. Thus, payments fluctuate based on the borrower's success. This is particularly helpful to retailers and other small businesses that experience seasonal ebbs and flows
- Approvals and funding happen rapidly -- often completed in a few days, as opposed to the weeks it can take for a traditional small business loans from banks to be granted.
- Large sums of money can be made available quickly. MCA amounts can be as small as $5,000 and as large as $200,000.
- Credit scores take less importance as MCA funders base their decisions on current operations and upcoming sales projections.
3. What are the eligibility requirements Merchant Cash Advance?
- A small business in operation for at least one year.
- Monthly credit card sales of $10,000 or more.
- Businesses that have not declared bankruptcy in the past 12 months and are free from liens and other judgements against them.
4. What does it work?
5. How is repayment made?
- 1. A percentage is take off each transaction at the credit card processing stage. Each time a business owner makes a credit card sale, a previously an agreed-upon percentage of the transaction is automatically forwarded to the MCA provider.
- 2. A "lock-box" is set up, and the business owner steers all of his credit card sales to it. Sales are divided, and the agreed upon percentage goes to the cash advance firm.
- 3. The MCA company agrees to have a direct debit from the business owner's account daily. The amount is based on the merchant's credit card sales that day.
For more information about Merchant Cash Advance, call Biz2Credit at (212) 644-4555 or email email@example.com.