There are a few misconceptions about merchant cash advances that business owners should be aware of. The first is that a merchant cash advance is a loan. It is not. A merchant cash advance is an advance on the future credit card sales of your business.
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Merchant cash advances (MCAs) have been around since the early 2000s but remain a relatively unknown financial product to small business owners.
- This may be due, in part, to misconceptions about MCAs: that they are a scam, too expensive, or difficult to qualify for.
- The second misconception is that a merchant cash advance is expensive. This may have been true in the past, but with the current interest rates, a merchant cash advance can be quite affordable, even for small businesses.
- Another common misconception is that a merchant cash advance is only for businesses with bad credit. This is not true. A merchant cash advance can be used by businesses of all sizes and credit histories.
- The final misconception about merchant cash advances is that they are difficult to obtain. This is also not true. Merchant cash advance providers will go over the application process with you to make sure all your questions are answered and that you understand how it works.
Understanding how merchant cash advances work—and why they can an important tool for small businesses—can help dispel these misconceptions.
Understanding How Merchant Cash Advances Loans Help Small Businesses
A merchant cash advance can provide a lot-needed capital for your business. With bad credit, no collateral and no third-party guarantees, a merchant cash advance is easier to qualify for than other forms of credit.
Merchant cash advances do not require lengthy paperwork and time is money especially when running a small business that does NOT have spare funds lying around like big businesses do! This loan option is perfect for entrepreneurs who need immediate funds to cover unexpected costs or finance an expansion without having to wait on a bank loan.
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MCAs work by buying a small percentage of your future credit card sales. For example, if you borrow $10,000 from an MCA provider, they will likely buy 10-15% of your future credit card sales.
Every month, the MCA provider will deduct a pre-determined percentage of your future sales from your credit card processor. This amount will be used to repay your loan plus interest and fees. If your business does not make any sales in a given month, there is no need to worry – you will not be charged anything.
What Are Merchant Cash Advances?
Merchant cash advances are an alternative to traditional business loans. Rather than receiving a fixed sum of cash up front, as you would with a loan, with a merchant cash advance you agree to sell a percentage of your future credit card sales to the lender. This allows businesses to access capital quickly and easily, without the hassle of applying for a loan or providing collateral.
How Do Merchant Cash Advances Work?
MCAs work by buying a small percentage of your future credit card sales. For example, if you borrow $10,000 from an MCA provider, they will likely buy 10-15% of your future credit card sales.2 This purchase is made over a period of time, usually 12-18 months.
Every month, the MCA provider will deduct a pre-determined percentage of your future sales from your credit card processor. This amount will be used to repay your loan plus interest and fees. If your business does not make any sales in a given month, there is no need to worry – you will not be charged anything.
Why Use Merchant Cash Advances?
There are several reasons why small businesses should consider using a merchant cash advance:
- They are quick and easy to obtain.
- There is no collateral required.
- MCAs offer competitive rates and terms.
- They can help businesses grow and expand.
- They are a great way to access capital quickly and easily.
Merchant cash advances can be a valuable tool for small businesses, offering quick and easy access to capital. By dispelling the misconceptions about MCAs, more business owners will be able to take advantage of this type of loan.
If you are still unsure whether a merchant cash advance can help your business cash needs to help purchase additional inventory, pay your employers or other business expenses then Progressive Business Capital qualified personnel are here to help with any questions or concerns. We provide many options and can walk you through the process and help you get your funds within as little as 24 hours.
