During these difficult times of economic recession, it has become an arduous task to obtain loans for business needs. Help is at hand in the form of Merchant Cash Advances (MCAs). It is a novel and alternative avenue of business loans. Cash advances are different from traditional funding programs in the sense that repayment is in the form of a daily percentage of credit card processing revenues. Companies of all sizes can top up their funding requirement if they have been business for at least one year and have at least $5000 in monthly credit card receipts.
Procuring traditional loans is an uphill task for SMBs with their lengthy application cycle, stringent approval standards and limited availability. A merchant cash advance simplifies business funding. Repayments are drawn from the credit card receipts. Moreover, business can avail it with minimal paperwork and timelines for approval are short. MCAs are a blessing for small business where there is immediate need for infusion of funds up to $250,000.
Following are the top seven reasons for getting a merchant cash advance rather than a traditional loan.
1. Faster processing: The processing time of MCAs is completed in a matter of few days as opposed to weeks or month for traditional loans. Some providers approve merchant advance within 24 hours and funds are released within seven working days.
2. Zero interference in how the funds can be used: MCA Providers do not interfere in the deployment of funds. This is a prerogative of the business proprietor. They can utilize the funds for rent, tax payments, inventory, bills, expansion, etc. They can even use these funds to pay off personal obligations.
3. Smooth application process: The adage ‘No pains, no gains’ does not apply to MCAs. Banks insist on elaborate business proposals and ask investigative questions. MCA providers are only interested in the monthly credit card receipts and months in business. You should be in business for at least nine months and monthly credit card receipts should average to at least $ 5,000. Documentary evidence in the form of tax returns or financial statements is not necessary. There are no incidental costs or application fees – the bane of traditional bank loans. Online approvals are also possible.
4. High approval rate: Low FICO scores, bankruptcies and poor credit history do not disqualify anyone to avail MCAs. Some providers evaluate only the business performance to provide funding. For example, a business that averages $50,000 credit card payments per month in the preceding year may be eligible for 1.5 times or $75,000. There may be slight variations in calculations by different providers.
5. No collateral required: MCA providers cannot attach personal assets if there is a business failure. This is a big positive for small businesses. No collaterals are required to be pledged and no personal guarantees are required to be given. MCA status is not that of a loan but purchase of your future revenue.
6. Automatic repayment: Repayment of a merchant cash advance is truly hassle-free. Either the business agrees to remit a certain percentage from its monthly visa/master card receipt or alternatively, instructions are provided to the credit card processor to automatically deduct the repayment amount each month. This obviates the need for any paperwork, check writing and penalties for delayed payments.
7. Revenue based repayment: The repayment fluctuates every month depending on the business receipts. When the going is good, repayment is more and when the going is tough, repayments are adjusted accordingly.