Did you know that around 54% of businesses struggle with late loan repayment, which impacts cash flow and profitability? If you own a small business, you need a robust way to fund your business and enjoy a little sales profit as well. For this purpose, you can always opt for Merchant Cash Advance that literally allow small companies to make a profit while not worrying about the fund repayment.
Merchant cash, or MCA, is not a typical loan. It is an advance payment that you are taking based on your credit sales. In this loan, the lender provides a lump sum advance, which is then repaid automatically using a fraction of your daily credit card or debit card receipts and an additional fee. The lenders generally look at your credit card processing statements to examine if you can repay the borrowed amount through your day-to-day sales from the credit card.
MCA fees are usually higher than those of its counterparts. However, the exact fee amount varies based on the borrower’s ability to repay the amount. Lenders determine the factor rate to calculate your fee based on your creditworthiness. If your business shows a healthy credit or debit card payment stream, the lender will likely charge you lesser fees.
Here are some salient features of MCA that make it more feasible for small business owners.
- Security: Unsecured, no collateral is needed to secure the advance.
- Maturity: Payments are processed daily through your merchant account until the advance is fully repaid.
- Factor rate: Typically falls between 1.14 and 1.18.
- Funding Time: The expedited process enables funding within 48 hours.
How Merchant Cash Advance Influence Your Small Business?
Compared to traditional bank loans, MCA is an easy and quick way to get funding for your small business. Moreover, it has a fast approval process with no collateral requirement that will better suit most small businesses – you don’t even need to have perfect credit. In addition, you will receive the amount within 48 hours of the approval process. These small perks make it the ideal funding system when you fall short in your business.
- The online application process for Merchant Cash Advances is simple and easy.
- You don’t need to have a perfect credit to apply for an MCA
- Payments with an MCA are much more flexible since the repayment amount is based on your credit card sales
- Fast approval and funds release – can get funds within 24 to 48 hours
- Repayment isn’t a fixed monthly payment
- There is no collateral requirement for MCA
These are just a few benefits to convince you that MCA can be more beneficial when looking for funds to aid your business. In addition, you must contact a reliable business cash advance company who can understand and help you build your small business profoundly. They will plan your MCA according to your business operations and needs so you can get enough sales and repay the loans without any trouble.
A Few Cons Of MCA
MCAs have many benefits, but we must also consider their darker side. With convenience, there is always a catch. Before opting for MCAs, you must know the drawbacks that can influence your business in the long run. Here are a few disadvantages you must be aware of.
- Extremely high APR, potentially as high as 200 percent
Most business cash advances have a higher annual percentage rate (APR) than traditional business loans. The high fee can influence your repayment frequency if you run a newer or smaller business. You must opt for other credit options if you cannot repay your loan with a higher APR. - High payment frequency that can hinder cash flow
MCAs are supposed to repay each month with a fixed flat or factor rate. The rate of 1.14 or 1.18 can be challenging to refund if you fail to have that certain level of credit sales. Moreover, the payment frequency can also hinder cash flow as the money coming in will repay you MCA. - No impact on business credit score or report
MCA is not a traditional loan, so it does not influence your credit score in any way, positively or negatively. It can be a drawback when you want approval for a major loan for your business operation. - Binding in ways that other loans aren’t
In some cases, business owners may be required to provide personal guarantees for MCAs, meaning they are liable for the loan repayment. This can expose the business owners to significant personal financial risk. - Unavailable to small businesses that don’t accept credit card payments
This is a situational but practical drawback when looking for Finance Solutions. Some small companies do not accept credit cards to secure some funds and expenditures. It can become a demerit when applying for MCAs.
Why Do You Opt For MCAs For Your Small Business?
Whether you are only seeking loans on a short-term basis or want to balance cash flow in a seasonal business, you can use a Merchant Cash Advance for various small business purposes. A MCA is a significant funding option if you are:
- Looking to expand business operations
- Looking to purchase new inventory or equipment
- Dealing with season issues
- Meeting payroll expenses
- Needing temporary cash flow help
- Paying other debts due
- In need of cash to pay unexpected payments and unplanned expenses
When you look for a small business loan, Merchant Cash Advance is the most effective way to get instant money to save your business. With fast approval and instant transfer, you can conveniently maintain your cash flow and manage your expenditures. To leverage all these perks, you must consult a reliable company that can design a plan that resonates with your needs and budget accordingly.
If you are looking for a durable company to apply for MCA, contact Purple Tree Funding today. We provide loans up to $500k with an easy approval process and fast funds transfer. We can design customized plans for your business so you can repay conveniently. To learn more about us and our personalized funding plans, visit us now!
