Merchant Cash Advance
The Merchant Cash Advance is similar to a traditional loan as it provides your business with a lump sum of money, also known as working capital. The financing end of the MCA is a little different and technically it is not even considered to be a “Loan”. MCA’s do not care much about your Business Credit unlike applying for a term loan.
Banks have strict regulations they must follow from the state it is in and from the federal government. The MCA (Merchant Cash Advance) provider does not have these strict regulations. Instead of making loans, these providers may choose to purchase your Accounts Receivables. In other words, let’s say you have $75,000 in outstanding invoices. Invoices that are due to you but, have not been paid in full. The MCA provider will offer to buy those invoices at a discount.
How does an MCA work?
For the sake of simplicity, your $75,000 in invoices could get you $60,000 in cash today. Some businesses may be short on working capital and will be willing to take that $60,000 offer instead of waiting up to 90 days for the full $75,000. So, you are essentially trading a little bit of cash in the long run for a larger sum in the short term.
If your business has a high volume of credit card sales this option could be for you. Let’s say, you get a $65,000 Merchant Cash Advance. You are not sure if you can pay it back because your business primarily survives with credit purchases and that money doesn’t always get into your account quickly. No problem, the provider can do a ACH or attach a lein to your merchant account. With this option, the provider will take a fixed percentage of your daily credit card sales until your MCA is paid in full.
Why choose an Alternative Financing MCA?
Alternative financing is becoming a popular way to get your business the working capital it needs to survive in these hard times. In a time where the majority of retail lenders (Banks) are saying NO, alternative financing providers are saying YES!