Knowing what financing services you can turn to when your business runs into a snag can make a huge difference in how the situation plays out. For some business owners, the option of going through the traditional channels of obtaining a loan through a bank might not be possible. Instead, plenty of people will turn to alternative financing options in order to find the most appropriate services for their needs. If you’re currently looking for funds, then it might be a good idea to see whether a service like a merchant cash advance is the right choice for your needs.

What Is a Merchant Cash Advance (MCA)?

Though you might have heard of this type of financing service before, you might not know exactly what a cash advance entails. Essentially, an MCA works by focusing on your credit card sales. A lender that specializes in this type of advance will look over your financial records and determine how much money your business makes via credit transactions within a given period. Using this number, the lender will then offer an advance to the borrower. The repayment plan is determined based on the projected credit sales of the business.

Managing an MCA

As you can expect, a merchant cash advance is a very useful service to consider when your business has run into some financial difficulties. Still, you need to think through a few points in advance in order to ensure this is the best fit for your situation. If you’re falling behind financially because you’re seeing unusually slow sales, for example, then taking out an MCA might not be the best fit. Should your slow period persist, you might not earn the money required to make the minimum payments on the advance when it has entered repayment. 

Advantages of an MCA

There are plenty of benefits that come along with using an advance to help your business through a budgetary bind. In many cases, a business owner will pursue this option when he or she is in need of access to working capital. When disruption to your cash flow occurs, it can prevent you from handling the expenses connected to running your business. By using an MCA as a safety net in such times, you can give yourself the peace of mind you need to keep your company afloat.

A merchant cash advance can offer a variety of advantages to a business owner. Review how the service works and determine if it will help your company get through a slow financial period.