Merchant Cash Advance - Merchant Services
Banks are less likely than ever to approve loans to small businesses, thanks to the current market. If you own or manage a small and growing business then you know that a little money has to go a long way. Loans are pretty much essential as you purchase equipment and grow your business. When a bank won't give you a loan you need to look elsewhere.
What about an unsecured business loan? You could opt to try out an unsecured business loan, but there are problems with that. You need credit to get an unsecured business loan. Most new businesses haven't had enough time to build up the credit that's required for them to even think about a loan such as an unsecured business loan. Luckily with a merchant cash advance, you don't need any credit at all to get the money you need to continue your business.
A Merchant cash advance, or MCA, is another term for credit card factoring. An MCA is a form of advanced payment that ranges from $5,000 - $30,000 to a business owner. Before receiving the money you have to agree to pay the MCA provider with credit card processing charges, when they occur, in the future.
The repayment amount is usually around 10-20% of your sales. This amount cannot change, once agreed to, so you know how much you are paying for the loan you took out. Don't worry if you expect a slow month either, you agreed to pay when you get paid and that's all that matters. You do need to make sure that the percentage you agreed to pay is less than your margin of profit. Don't agree to lose money, MCA lenders will work with you to find a plan that benefits both of you. So if items you are selling have a 20% profit margin, don't agree to anything higher than 10%.
If things are not going well after the cash advance, you don't have to worry. They agreed to a percentage of your monthly sales and they are happy about that, no matter how high or low your sales are. The higher your volume the faster you will pay it off, yet most MCA lenders recognize that startup businesses take a while to pay back these types of loans. So in short, if it takes you longer than a year to repay the loan you shouldn't worry. You will not see legal action taken by your advance cash lender.
Even if your business has been open for as little as thirty days you can find benefits in merchant services such as an MCA. The first year is the hardest for most businesses. It's hard for a brand-new business to get customers to come in without establishing themselves first. A merchant cash advance can help with this and get you the supplies and advertising that you need to start improving your business. You don't need any credit, unlike unsecured business loans.
Unlike banks, MCA loans do not require collateral to obtain. This means you won't be putting your personal life on the line for your business. If there ever is a case where you cannot pay back a loan, and you put your house or car up as collateral, things would not be looking good for you. On the other hand, if you put up your business's building as collateral, then things get even worse. You miss a single payment and your whole business can be taken over and sold to a competitor, leaving you with nothing in the end.
MCAs are the quickest way for a business to get a loan. Banks can take months to process all the paperwork and decide whether they are going to approve or deny your loan. MCA loans only take a week to complete the entire process from start to finish. This means if you are in a pinch and need the money quickly, an MCA is a great option to consider.
How an MCA loan can help expand your current working capital. When your current liabilities overcome your total assets you are considered to be in a working capital deficit. When you take a loan out you are further increasing your liabilities, however, it's considered less of a liability. The reason MCA is less of a liability comes from the fact that you don't have a monthly fee to pay. If you make no money in a month, you don't pay a dime. So essentially, you can increase your assets and profits with little liability to you and your business. This makes your business more profitable and better looking on paper for future loans.
As you can see getting a business cash advance can be the solution to the many problems of owning a small business. Once you agree on the terms all you have to do is let them take their cut of the merchant processing. You don't have to worry about giving them money on a monthly basis or putting up collateral. MCA loans have been gaining traction since 2022 when the industry grew by over 50%. The growth in the MCA industry has led to new and exciting small businesses since they complement them so well. So the next time you need money for your small business, consider an MCA loan as an option.
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