Whether you’re planning to start a new business or thinking of expanding an existing one, a quick supply of cash is needed to keep up with the pace. Traditional bank loans come with a number of terms and conditions which are sometimes difficult to meet. Moreover, seeing the recent economic downfall, banks have even ceased funding businesses with a not so great credit history. This is especially problematic for startup businesses. With all these hoops to jump through, it can cause a delay in your cash flow which can directly affect your business operations. In such a scenario, a Merchant Cash Advance, or MCA, can be your solution.
Merchant Cash Advances – The Basics
A merchant cash advance is a quick and easy alternative to business funding without the need for collateral. For entrepreneurs who have bad credit and cannot fulfill the loan criteria of a traditional bank, merchant cash advances are the ideal solution. Unlike a traditional bank loan, MCA loans are easy to apply for and are processed quickly. In return, the MCA providers recoup their funds by deducting a fixed percentage of total credit sales, each month. It is perfect for businesses with a high concentration of credit card receivables.
Easy loan requirements, quick processing, and no formalities, are making merchant cash advances the preferred choice over traditional bank loans.
Here are Four Reasons Why MCA’s are Taking Over Traditional Bank Loans
No credit or collateral
A merchant cash advance is a safe approach to funding a business. Unlike traditional business loans that can affect a business’s credit rating if there is an issue in repayments, a merchant cash advance is a sales transaction and thus stays off your credit report. This is an important reason why merchants consider MCA loans over traditional loans.
Easy loan requests, fast processing, and repayments
A merchant cash advance is an easy, straightforward loan process from start to finish. This business loan is often described as immediate cash because there is very little paperwork. Traditional banks analyze a number of things, including financial statements, business plans, and tax returns, while merchant cash advances follow simple criteria considering only two things: monthly credit card sales and the length of time in business. You do not need another reason to opt MCA loans for financing your business.
High approval rate
A merchant cash advance depends on actual business performance instead of credit to assess the applicants who have requested a loan. This practical approach allows any stable business to qualify for an MCA. Typically, the loan amount depends on the business’ average monthly revenue in the previous year.
Fair-minded repayment methods
A leading MCA provider claimed that, “We get paid only when your business gets paid.” And, that statement is very true. While a traditional bank loan requires a fixed monthly payment, merchant cash advance repayments are a percentage amount of total credit sales, which can fluctuate based on sales volume. When sales are more, the MCA retrieves a higher monthly sum and in lean times, the MCA recoups its funds accordingly. In this way, merchant cash advances collect their share proportionally rather than draining the business’ funds.
When a business owner needs a safe, quick cash infusion, an MCA is the best alternative. Moreover, merchant cash advances offer a business the flexibility to negotiate the ups and downs of today’s dynamic economy.