How Merchant Cash Advance Can Help A Small Business Owner?

How Merchant Cash Advance Can Help A Small Business Owner?

The merchant cash advance industry is growing rapidly. This is because the traditional banks are getting failed in meeting the needs of small businesses. If you own a business, you might need quick access of cash to meet your short-term need for capital. Sometimes you can also leverage your credit card merchant account to access funds. MCA (merchant cash advance) is a best alternative to escape from lengthy credit process approval that you require for a traditional term loan. 

MCA providers evaluate risk and weight credit criteria differently than a banker or other lenders. They study daily credit card receipts to make sure if a business can pay back the advance in a timely manner. Rates on an MCA can be much higher than other financing options. Being a business owner, you need to understand the terms you’re being offered. So it’s truly important to make an informed decision about whether or not an MCA will meet your needs. 

In today’s time, a small business can easily apply for an MCA and have an advance deposited into its account very quickly. A cash advance provider gives merchant a lump sum cash advance. In exchange, merchants agree to pay back the principal and fee, by giving the company an agreed percentage of their credit card sales until their balance reach zero. The percentage is between12% to 24%.

How a Merchant Cash Advance Works 

Usually, an agreement is made between the small business owner and the MCA provider in concern to advance amount, payback amount, holdback and term of the advance. After successful agreement, the advance is transferred to the business bank account. Each day, an agreed upon percentage of the daily credit card receipts are withdrawn to pay back the MCA. This process is called a holdback” and it continue until total advance amount is paid.

Evaluate Risk 

Business cash advance providers evaluate risk and weight credit criteria differently than a banker. An MCA provider looks at the daily credit card receipts to determine if the business can pay back the funds in a timely manner. Ultimately, a small business sells a portion of future credit card sales to obtain capital instantly. 

Merchants should use the providers’ credit card processor because the advance is paid back automatically as a percentage of each lot’s proceeds. Companies with a small number of merchant cash advance do not need merchant to change credit card processors. So, it’s important to know what your merchant cash advance company may offer you. 

Offer Easy Repayment 

Since repayment is based upon a percentage of the daily balance in the merchant amount, a business is able to repay the advance faster. If any day, transaction is lower, the draw from the merchant account is also low. It means that during slow business, the business payback is concerned to their incoming cash flow. Ultimately, this ensure relatively painless repayments.

You don’t need to be a financing expert to build a successful business, but just to consider business loan options available to determine the best one to meet your business need.

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