Glossary of Business Credit Terms

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Merchant Cash Advance Loan

What Is Merchant Cash Advance Loan?

A merchant cash advance (MCA) is usually structured as a lump sum cash payment made by a financing company against a business’s future income such as credit card and/or debit card sales. You can use this short term financing for inventory purchase, debt payment, and as working capital. This funding option is suitable for maintaining your company’s cash flow. Besides, it offers you quick access to funds for growing your enterprise.

How does Merchant Cash Advance Loan Work?

A business repays the lump sum obtained as MCA by a percentage (retrieval rate) of its daily credit card receipts. The amount of the advance payment, the repayment period and your company’s daily profit determines the retrieval rate or holdback. Repayment starts instantly after the business receives the funds. However, the amount of the advance payment determines the period given for the refund. The financing provider reviews the previous credit receipts of your business for some months to determine your financial strength before the payment. Your eligibility status determines the amount your company receives.

The Importance of Merchant Cash Advance Loan For Small Business

You may have an urgent need for funds to operate your small business. Applying for the conventional commercial loan will not be an ideal option in this case due to the time constraint. A merchant cash advance or MCA will provide you with quick funds for financing your company.

The Advantages and Disadvantages of Merchant Cash Advance Loan

The MCA is an ideal finance option for settling your business’s financial problems. However, you need to consider its benefits and drawbacks before taking your final decision.

Advantages of MCA

The following characteristics make this financing type an ideal option for a business that needs quick cash.

  • Quick funding. The providers can make cash payment within hours of submitting your request. Consequently, you can apply for funds if you have unexpected payments to settle.
  • Easy application process and fast approval of the request.
  • Collateral is not required.
  • Excellent credit rating is not needed.
  • Flexible payments since only a percentage of your daily income are refunded.

Disadvantages of MCA

  • The high cost of securing the funds compared to conventional commercial loans.
  • Reduction of cash flow due to the daily repayment.

It takes time to get approval for traditional loans. Instead of wasting your time, you can obtain a merchant cash advance which suitable for various business purposes.

What are the Qualifications for Merchant Cash Advance Loan?

MCA is suitable for businesses that need quick access to cash. The eligibility standard requires companies to have a credit rating of 550 and at least two years of business history. An excellent credit history can increase the amount of the advance payment. However, you can also obtain funds with a low credit score. Despite their credit ratings, businesses with financial needs can obtain funds from MCA providers.

Start-ups with limited business history but adequate credit card sales are also eligible for the advance cash payment. The merchant cash advance is a great finance option for businesses that realize higher returns from credit card receipts.

How to Obtain the Merchant Cash Advance for Your Small Business?

You can complete the application online. The process is easy and fast. Your request may be approved within 24 hours of submission. However, the providers will review the financial reports of your business to ascertain its financial strength. The following documents are required for the application process.

  • Credit ratings
  • Bank statements
  • Business tax returns
  • Voided business check
  • Driver’s license

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