Merchant Cash Advance

Funding up

To $1 million

Ready to grow your business?

See how much you qualify for:
Current monthly sales deposit average to your business bank account?
How much Working Capital would you like for your business?

Intro to Merchant Cash Advances

A merchant cash advance could be the answer for you if you are a small-business owner in need of immediate access to capital. This type of cash advance is also known as a business cash advance. It’s easy to access and has flexible payment terms. Merchant cash advances don’t require a high credit score or a plethora of financial statements.

Merchant cash advances are not fixed and based on daily credit card sales. Business owners pay only what they can afford each month. A merchant cash advance is not more expensive when sales drop for a short time, even though it is geared toward short-term projects. A merchant cash advance is ideal for small business owners who would have difficulty meeting the fixed repayment schedules of conventional business loans.

What is a Merchant Cash advance?

Merchant Cash Advances (MCAs) are also known as “business cash advances,” “factoring” or “credit card processor loan”. A business owner receives a lump-sum that is paid back by a percentage of daily credit card sales in the future (holdback rate). The amount of the payments varies depending on your daily debit or credit card sales.

The application process for a merchant cash advance is less difficult than other small business loans. This option is a good choice for small business owners who have little collateral, a poor business credit rating, or if their Fico score is low. Merchant cash advance companies will determine how much business financing you can qualify for based on your future credit card receivables and the sales that you make using credit cards.

This type of business financing arrangement allows you to accept a lump-sum payment in exchange for future sales of credit cards at a discounted rate. It is a “discount” on future sales of credit cards. The provider of merchant cash advances distributes the money almost instantly, instead of waiting for weeks or months before receiving the full amount from the credit-card processing company.

$5K - $10M

Maximum Funding Account

FACTOR RATE

From 1-6% Per Month

TERM

3-24 Months

SPEED

1-2 Business Days

How Does A Merchant Cash Advance Work?

Here’s the difference between a traditional bank loan and a merchant cash advances: your merchant cash advance amount and terms are largely determined by your monthly credit card sales. This is the primary criterion to qualify for a merchant cash advance in general. Poor credit is unlikely to prevent you from being approved as long as your sales are strong from credit and debit cards.

Your business credit rating does affect other aspects of your merchant cash loan. The “holdback rate”, or “holdback percent”, is the percentage deducted from daily or weekly sales. Typical holdback rates range between 8% to 15%. Your holdback amount will change based on your business’s revenue.

An Example of a Merchant Cash Advance

Let’s say, for example, that you borrowed $50,000 at a rate 1.4. You would owe $70,000 total. MCA providers take 10% off your debit or credit card transactions every time you batch out. You generate $100k in card transactions during the first month. You would pay $333 per day based on your holdback percent to repay $10,000 each month. You only have $70,000 in credit card receipts. Your daily payment would be $233 since the percentage and terms of holdback repayment never change.

A merchant account is designed, like other short-term financing products for businesses, to be repaid in full as soon as possible. The total cost will decrease if your sales are slow and spread out over a longer period of time.

Reports, Facts & Research on Merchant Cash Advance

Nearly 64% of American small businesses still face financing challenges. These include managing operational expenses and access to capital. Source : Small Business Credit Survey : 2019 Report on Employer Companies

Online lending is growing. Morgan Stanley predicts that online lenders and fintech firms will lend $47 billion to small businesses by 2020. This is 16% of all small and midsize businesses credit approvals. Source National Community Reinvestment Coalition

ACH payments (Automated Clearing Houses) grew by 6% per year from 2015 to 2018. Debit and credit card transactions grew by 8.9% annually between 2015 and 2018. Source: Federal Reserve Payments Survey: Initial Data Release

What are the Advantages of a Merchant Cash Advance?

There are few small business financing options that are easier to qualify. This may be your only option if you have a poor credit score, problems with your payment history or cash flow problems and you’ve been in business for less than a year. The requirements are so lenient that you can be approved within 24 hours.

This repayment structure is especially beneficial for businesses with a high seasonality, or businesses who experience periodic revenue dips and cash flow gaps. Slow months will result in smaller payments than paying the same amount every month, no matter how well your company is doing. Theoretically, seasonal businesses can use the money during the slow months and pay a large portion of the loan back during the busy seasons. This is true even if they are separated by three or four months. You don’t need to make the same payment if you know that future sales will fall again after the busy period.

This is the ideal scenario for a merchant advance, as you would pay a fluctuating amount over a longer period of time.

Let’s say, for example, that you have advanced a merchant loan of $100,000 at a factor of 1.3. Your principal is now $130,000. APR is at least 60% if you pay off the advance in six months. Your APR will be higher if you pay back the agreed-upon advance in 12 months.

What are the Disadvantages of a Merchant Cash Advance?

Uncertain requirements can be costly. Borrowers who have low FICO scores or cash flow issues are statistically more likely to not pay back the merchant cash advance in full. A merchant loan is therefore one of the most costly small business financing options available. The higher payment amounts compensate for the increased risk that merchant advance companies are exposed to.

Your operating capital could be put under tremendous strain by the size and frequency of payments. Even if sales were strong for several consecutive months, you would still make higher payments.

There’s also no advantage to paying back the merchant cash advance in full early. This is different from a traditional loan where you can save money by paying early. It is different from a business line of credits and term loan that have amortization plans. Paying early will allow you to save money on the interest rate.

PRODUCTS
CONS

Compare Merchant Cash Advance to Other Products

Who is Eligible for Merchant Cash Advances?

Businesses that are approved generally meet the following criteria.

Annual Revenues
$ 1 k+
Credit Score
1 +
Months Time in Business
1 +

How to Apply for a Merchant Cash Advance

You can borrow up to $10 million with terms of up to 48 months. How to Apply:

Your Merchant Cash Advance Gets Set Up – Now What?

It’s not just about getting financing. This is a great opportunity to build (or improve) your credit.

No matter what small business loan you receive, be sure to make your payments on time. Keep your balance under the limit if you have a line of credit, or any other revolving loan product. You hope that your customers will pay on time their invoices if you have taken an account payable financing.

Fico Scores will be positively affected if you consistently make payments to your merchant cash advances company on time, in full and regularly. This will allow you to get better rates and terms the next time you need a small-business loan.

What if I am declined for a merchant cash advance?

Your operating capital may not be able to support the daily repayment schedule if your merchant cash advances application is declined. We, and other merchant cash advance lenders will suggest a product that is less stressful on your operating capital. accounts payable factoring or equipment loan are also options.

We may recommend that a business owner choose a different loan or financing option if they cannot afford to take on more debt. Business loans and credit cards are examples. Both options can help build your credit, and are likely to be easier to qualify than small business loans.

Imagine you were denied a merchant cash loan because your FICO score was low. You should then consider credit repair services for your business credit bureaus and personal credit. These services can boost your credit score with both personal and business bureaus. They do this by identifying what is affecting your score and developing a plan to eliminate it. These are usually simple fixes, such as repaying payday loans or reducing your personal debt. This will pave the way for a merchant cash advance in the future and possibly small business loans with better interest rates.

Testimonials

What Business Owners Like You Are Saying

Are you ready to expand your business? Find the best funding option for your business.

Scroll to Top

Get A Free Quote Today!

Current monthly sales deposit average to your business bank account?
How much Working Capital would you like for your business?