Merchant cash advance (MCA) is not a loan technically, it’s a quick and easy way to get funding with no collateral—even you don’t have a great credit score. In MCA, a business owner enables to sell out the future receivables, as these are not attached to collateral.
A merchant cash advance offers a lump sum of money against a business’s future credit card sales. MCAs are used widely as an alternative to traditional loans and may be the best fit for your financing needs.
Who needs to consider MCAs for their business?
Merchant cash advances are usually great for small business and in particular, they’re excellent for the industries such as:
In a retail business, a time comes where sales are no more consistent—ups and downs are part of every business. Perhaps, there’s a busy season or a slump after the breaks, here the merchant cash advance comes in. If you’re looking to start a retail business, definitely MCA will be a right stop for you.
The restaurant industry has greatly benefited from a merchant cash advance, dealing with unanticipated cost associated issues such as equipment failure, lack of inventory and working capital. Whenever, a business encounters such issues, a source of working capital considers great. With a merchant cash advance, you can finance up to 100% of the worth of your restaurant.
- Medical Services
The medical industry experiencing expensive equipment issues also seek benefits from a merchant cash advance. To cover the expenses, MCA is the best solution to get funded for medical services.
How to Apply for Merchant Cash Advance?
One can obtain a merchant cash advance through an easy and simple application process. After getting approved, you may receive the loan within just 2 days. Usually, lenders allow you to apply for a merchant cash advance online.
To get a merchant cash advance, an application must be filled along with the following requirements:
- Business owner’s full name
- Business owner’s home address
- Owner’s SSN
- Percentage of ownership
- Loan amount
- Company name
- Company address
- Contact details
- Annual gross revenue of a business
Once you’ve agreed to all terms and conditions, you can proceed to the next step that includes:
- Business ID
- Credit report
- Financial statement
- Current credit card processing statements
- Business tax returns
Without a business credit card, you’re unable to build a business credit score. However, lenders mostly consider existing loans obtained by a business or have your business ever applied for funds in the past. Once, everything is set up, lenders deposit funds into your business bank account.
Advantage of Merchant Cash Advance
Merchant cash advance has a number of advantages to financing the small businesses—looking for quick funds. As a business owner, you must consider several points, such as:
- An Efficient Application Process
Business owners can apply for a merchant cash advance, by filling a simple application form. A number of MCA applications are available online, that require only a few minutes to fill.
To get approved for a loan, business owners are supposed to submit the relevant documents including bank account statements and tax returns. However, the qualification requirement for MCA is lower as compared to other funding types.
- Quick Access to Funds
Merchant cash advance provides fast access to obtain the funds. An application can be approved within 48 hours, and funds are deposited in your business bank account within a couple of days. Sometimes, the short wait is considered good for a business in order to meet the expenses without going through the hassle of a traditional lender.
- Credit Is Not a Deciding Factor
Some lenders ask for personal and business credit, whereas MCA is based on your future earnings, and credit & debit card sales. Lenders are usually concerned with how long you have been in business and stability of monthly based average sales.
- No Collateral Requirements
No collateral needed for a merchant cash advance as it’s an unsecured business loan type. Unlike other loans, you’re not required to set any of your personal or business asset on the line to obtain funds.
The Downsides of MCAs
Before getting funds through a merchant cash advance, weigh these disadvantages against the potential benefits. There’re plenty of reasons, you need to consider for a merchant cash advance.
- Need Strong Credit and Debit Card Sales
Businesses with lack of credit sales might face difficulties while getting approved for a merchant cash advance. In this process, lenders usually don’t ask for a strong credit score, but your business requires a history of credit and debit card revenue in order to receive funds.
- Expensive than Traditional Bank Loans
Merchant cash advance is quite expensive as compared to other lending options— keeping annual percentage rate (APR) higher between 60% and 200%. However, MCAs are typically less than one year, and business owners who go for this option are pursuing one of the cost-effective forms of lending.
- Not Subject to Federal Regulation
Merchant cash advances aren’t subject to federal regulations due to commercial transactions and administrated by the Uniform Commercial Code instead of banking laws. MCAs are exempt from laws that exclude charges above industry standard interest rates.
MCAs are a quick and easy form of financing. If your business processes a lot of credit card transactions, and you’re looking for temporary solutions, go for a merchant cash advance.
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