Many small business owners looking for loans consider merchant cash advance or (MCAs). It’s a great option, especially if you have poor credit and want to address a cash flow crisis or need urgent working capital. In the article below, we will explain how this type of funding works.

What Is a Merchant Cash Advance?

An MCA is an alternative type of funding for a business. Here, the financing company gives you a huge sum which you repay with a certain percentage of your future sales plus an extra fee. This type of financing isn’t your usual traditional loan. Rather, the financing company buys your future sales to repay the loan.

An MCA is great for businesses that need capital to address cash flow issues or cover immediate expenses. Also, these providers don’t subscribe to the usual traditional loan requirements, but rather they focus on your credit and debit card transactions.

How Are Merchant Cash Advances Repaid?

A merchant cash advance loan is repaid in two ways. The first one is through a percentage of credit/debit card sales. The MCA provider automatically deducts part of your sales, either daily or weekly, until you finish repaying the loan. Unlike traditional business loans, you don’t get a specific repayment term. Instead, the repayment period will be determined by your sales.

Another way to repay an MCA loan is for the provider to withdraw regular fixed amounts from the business’s bank account. The provider can withdraw funds daily or weekly, despite what you have made on sales. With such a method, you can calculate how long it will take for you to repay the loan.

Pros and Cons of Merchant Cash Advance

One of the benefits of MCAs is that the approval process is quick. It takes only a few business documents to get approved. Also, it’s easy to qualify even with bad credit.

On the downside, understanding the real borrowing cost can be confusing, making it harder to know how much this loan will cost you. Also, you will need to make frequent payments, which can be challenging for some businesses.

Do you have questions about merchant cash advance you’d like answered? Private Client Capital Partners is here to help. Contact us today and schedule a consultation with one of our experts.