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Top Seven Reasons Of Choosing A Merchant Cash Advance Over A Business Loan
The economic slump is a tough time for businesses hoping to get loans
. Help is at hand in the form of the new financing source on the block - merchant cash advance (MCA), also called a business cash advance. It is a growing form of loan for business financing. MCA differs from traditional loans as repayments are in the form of daily cut of credit card revenue. Companies can apply for MCA if they have been around for at least 9 to 12 months and have decent credit card revenue each month.Getting approved for a bank loan is an uphill undertaking for SMBs with its drawn out processing time, strict approval standards, and limited availability. On the contrary, a merchant advance can be obtained with very little paperwork and within a very short time frame. MCA is a blessing for small businesses that need immediate financing as high as $250,000.
Following are the top 7 benefits of getting a merchant cash advance instead of a traditional loan:
1. Short approval cycle: The processing of MCA is completed in a few days as opposed to the weeks or months for regular loans. Some providers approve the advance in less than one day and release the advanced amount within seven working days.
2. Zero interference in how the advance will be used: MCA providers are not concerned about the likely usage of money. It is the business owner's right to use it as she desires. The owner can employ the cash for paying rent payment, catch up on tax obligations, restock inventory, fund development, etc. or to meet personal obligations.
3. Trouble-free application process: The phrase "No pain, no gain" does not apply to MCA. Financial institutions such as banks insist upon elaborate business plans and ask multiple investigatory questions to get a grip on the the past, present, and future plans of your business before issuing a loan. On the other hand, MCA providers are only interested in the monthly credit card sales receipts and the time you have been in business. You should have been at least nine months in business and averaging a minimum of $5,000 in monthly credit card sales. Documentation in the form of tax returns or financial statements is not expected. There are no hidden expenses or application fees - the bane of standard bank loans. Online approvals are also possible.
4. High approval rate: Low FICO scores, previous bankruptcies, and poor credit history are not deterrents to getting an MCA. Providers value your existing business performance to approve funding. For instance, a business that churns out an average of $50,000 in credit card sales per month in the preceding year may be approved for 1.5 times the amount or $75,000. (Calculations may vary for different providers).
5. No collateral necessary as security: MCA providers cannot seize personal or business property if there is a business failure and the advance is not paid. This is a big positive for small businesses. Collateral or guarantees are not needed for obtaining the advance. MCA is treated like a purchase of future revenue and not a loan.
6. Automatic deductions for repayments: Repayment of merchant cash advance is straightforward for both the provider and the seller. Either the business agrees to remit a certain cut from its monthly credit card receipts or the credit card processor is directed to automatically deduct the repayment amount every month. This obviates the need to write payment checks, and possibility of incurring fines for missed payments.
7. Repayments based on sales volume: The repayment amount fluctuates each month based on the credit card sales receipts. When the going is good, the repayment amounts are bigger and if sale drops, the repayment amount gets smaller.
Merchant cash advance is a blessing for small businesses that do not have the wherewithal to get approved for loans from banks and other financial institutions. With the credit crunch running longer than expected, MCA is definitely a flexible and business-friendly funding option.
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