4 Big Advantages of Using an MCA
Businesses need capital to grow and at times, much of the capital is not liquid or available for immediate withdrawal. It is then that businesses need to look into alternative methods of raising capital, and many of these methods often involve borrowing the necessary funds with the expectation that future growth will be sufficient to pay back. One of the options businesses can use is a merchant cash advance (MCA).
What Is a Merchant Cash Advance?
Merchant Cash Advances are a form of funding for businesses. However, it needs to be made clear that they are not loans. They are, in fact, considered a discounted purchase of future credit sales. For example, you decide to sell $1 worth of credit. You would receive a portion of that dollar up front to use for expenses, and once revenue of that sale comes in, the dollar would go to the funding company.
Merchant cash advances provide four big advantages over other types of funding. Loans and investments generally have a lengthy application process and require a minimum credit score before the application is even considered. Getting a merchant cash advance circumvents many of the traditional types of funding including loans.
- Easy application. The turnaround time with an MCA is significantly less than that of a loan. Those applying can typically receive funds within the same week.
- No credit risk. Because it is considered a sale, there is no direct reporting to the credit bureaus. In addition, no collateral is required.
- A high approval rate. Again, because an advance is not a loan, very few merchants are turned down if they can prove that they have future revenue.
- Flexible payment rates. Whereas loans have a fixed rate of repayment each month, the amount credited to an MCA is entirely dependent on the amount of revenue that comes in.
With the advances in technology, there are so many more options out there for businesses. Even small or mid-range businesses stand a chance at flourishing, especially with the advent of more non-traditional methods of funding. One non-traditional option is that of the merchant cash advance, which finds a way to supply almost immediately available funds to businesses without having to rely on credit ratings or collateral. Even high-risk start-ups can get merchant cash advances if they are able to provide enough revenue to in credit sales. Because of this ease of use and flexibility, MCAs are a viable source of funding that many businesses should consider.