Merchant Cash Advance An Overview of a Merchant Cash Advance
Author: Grant Olsen
Date posted: 09.04.23

A merchant cash advance is one of the easiest products to get approved for and can be very useful when funds are needed very quickly. This product is not a loan – It is a sale of future receivables. The repayment term normally ranges from 6 – 18 months and payments can be set as either a fixed dollar amount or a fixed percentage of credit card sales.

Merchant Cash Advance

When your business encounters unexpected expenses or needs extra money, a merchant cash advance can be a quick and handy solution. This kind of financing, known as a Merchant Cash Advance (MCA), lets you get a lump sum of up to $1,000,000, unlocking numerous benefits for your business. With an MCA, you can access the funds you need and discover how it can help your business grow in this comprehensive overview.

 

MCA’s are streamlined for rapid delivery, so you’ll potentially receive an approval the same day you submit an application. And the one-time advance will become available to your business in as little as 1 day.

 

These are crucial benefits, as there aren’t many financing products that can deliver such expedited funds to your business. Most bank loans involve a waiting period ranging from 4 weeks to 4 months. But when time is of the essence, it’s often worth it to seek a faster solution such as a merchant cash advance.

What Is a Merchant Cash Advance?

First off, it isn’t a loan. There’s no interest rate and you won’t see it in your balance sheet as financial debt.

 

The unique arrangement with this type of funding is that you’re leveraging the future earnings of your business to connect with capital in the short-term. The maximum funding amount usually tops out at $1,000,000, which you’ll repay over a term lasting between 4 and 18 months.

 

How exactly do you repay your revenue advance? Repayment is made by either a fixed dollar amount or a fixed percentage of your credit card deposits paid to the funder via ACH debit. This is generally done on a daily or weekly basis.

 

There is no collateral required for a cash advance, which is a huge benefit. Also, they can help you build business credit. To maximize tax benefits, collaborate with your accountant and deduct the received amount from your future sales.

Merchant Cash Advance

Using a Merchant Cash Advance

As with short term loans, these funding products are ideal for situations where you need money fast. So if crucial equipment breaks down or you’re presented with an unexpected business opportunity, a revenue advance could be the way to go.

This type of financing is flexible enough that you can use them for a wide array of business purposes. Ideal for medical offices, as well as restaurants and construction companies, facing equipment, staffing, or material challenges.

 

Applying for a Merchant Cash Advance

Cash advances are among the easiest financing to obtain. Moreover, the qualifications are more relaxed because the risk is lower for funders. Additionally, based on your future sales, funders won’t scrutinize your past compared to traditional loans. Consequently, this is good news for borrowers with poor credit or limited business histories. Furthermore, plan on the funder requesting bank statements for the past several months. Finally, you can typically expect to receive maximum financing equal to as much as 200% of gross monthly revenue.

About The Author | Grant Olsen

Grant is a writer specializing in small business loans, leadership skills, and growth strategies. He is a contributing writer for KSL 5 TV and has been featured on FitSmallBusiness.com and ModernHealthcare.com. Grant has a B.A. in English from Brigham Young University.

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