Merchant Cash Advance An Overview of a Merchant Cash Advance
Author: Grant Olsen
Date posted: 05.25.20

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 faces an unexpected expense or seeks a boost to cash reserves, a merchant cash advance can provide a fast and convenient solution. With this type of financing, you can receive a lump sum advance of up to $1,000,000.

 

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. Be sure to work with your accountant to get the full tax benefit—you can usually deduct the difference between the amount you received and the amount of your future sales.

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. So if you’re a medical office adding new equipment, a restaurant trying to hire staff for the summer rush, or a construction company struggling with higher-than-usual materials costs, this could be your answer.

 

 

Applying for a Merchant Cash Advance

Cash advances are among the easiest financing to obtain. The qualifications are more relaxed because the risk is lower for funders, so they’re more likely to work with a borrower who wouldn’t qualify for a more traditional business loan. Because this financing is based on your future sales, funders won’t scrutinize your past as much as with other traditional loan products. This is good news for borrowers who have less-than-impressive credit scores or don’t have lengthy business histories. Plan on the funder requesting bank statements for the past several months. 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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