With consistent innovation in the financial world, there have been new products visible that provide businesses with instant cash, for a portion of their future credit sales. Merchant Cash Advance (MCA) provides necessary small business funding
quickly, enabling businesses to use the power of their future credit sales as a guarantee for timely returns. It provides much needed working capital to small business and retail outlets so that everyday business activities can carry on. A lender may provide flexible or fixed payment terms while withholding a certain percentage or amount of your monthly sales as part of their repayment plan. As sales grow, the MCA amount can be repaid quickly and easily.
There are visible benefits of Merchant Cash Advance for businesses who have just started operating, or seek payment from customers through credit and debit cards. One such example is how e-commerce websites and online stores have spurred up. Many e-commerce websites and online store use credit cards and debit cards for payment and sales. Many also provide regular discounts for the use of credit and debit cards on their website or stores. MCA makes for an exciting value proposition for such businesses who need small business funding quickly and without strict conditions. Some visible benefits include:
Easy and Fast Application Process
Many lenders provide online application forms that request business ID and operational details before providing you with MCA facilities. As an owner, your business should have at least $5,000 or above in monthly credit sales, and processing credit cards for over two months. Applications are processed within hours.
Access to Quick Capital
MCA is an innovative form of a working capital loan that provides access to quick cash when needed. Because lenders are more concerned about your future sales, they provide business counseling and support services to small business owners. Much of the MCA process works like factoring where the lender takes control of your future credit sales. Because you owe only a proportion of your future sales, your debt never grows beyond what your business happens to make. There is a small factor fee, or cash advance fee that will be charged, irrespective of what was owed.
Less Effect on Credit Score
Usually, a small business loan or a working capital loan depends on your credit score and business standing. Interest rates and collateral are charged on the ability of business to repay debt on time and their prior trading history. MCA is more forward-looking and relies more on the potential for growth. If a business relies heavily on credit sales and it takes time to turn inventory into liquid assets, MCA can be of help.
Merchant Cash Advance facilities have evolved over time. As it provides quick access to capital and flexible payment terms, small business owners should know that it is not a substitute for small business loans or business line of credit. They would still need long term growth and should be aware of their funding needs beforehand. MCA capital can be costly in the long run but is a good short term remedy to raise capital.