Most people don’t really think about a merchant cash advance until they are desperate for one. Knowing how an MCA works can help you navigate these waters and reduce the stress you’re already under trying to keep cash flowing in your business.
What Is an MCA?
If you’re looking for insider tips on how a merchant cash advance works, you may be wondering what exactly an MCA even is. You’ve heard of cash advances. They’re advertised on television all the time, but what is a merchant cash advance?
An MCA is more like a small business loan, but the process to apply is much simpler and faster. Normally, you can receive your funds in under 10 days. This is vital if your business is experiencing a cash flow problem. The loan is typically an unsecured loan, meaning you are stating you are personally responsible to repay the loan but you don’t have to put your home on the line to do so.
Most places use the promise of your future debit and credit card receivables to secure the loan. This can work well during times when you need some extra cash to buy supplies but won’t receive your own money for sales for a few weeks.
How Do You Apply
Some of the qualifications that will be looked at before you’re given an MCA will be how much you’re processing in credit and debit transactions. Most places want to see at least $5,000 a month.
You’ll need to have a history of these transactions, usually up to nine months’ worth. There may be other elements that are looked at, but the application is a simple form that is filled in and then you must provide supporting evidence of debit/credit sales.
What To Expect After the Loan
The merchant will take a portion of your credit and debit card sales until the loan is repaid. The terms will be clearly laid out before you accept the loan, so you’ll always know what to expect. There are no surprised.
Once the loan is paid off, if you need to borrow money again because your business is once again growing, you can simply take out another MCA.
Disclaimer: A merchant cash advance is the purchase of future credit card or debit card sales and is not a loan product.
