What is a Merchant Cash Advance?
A Merchant Cash Advance (MCA) is a bank-alternative product that provides working capital to business owners. The MCA space that provide a variety of Business Advance programs, comparable to the different programs and rates available through banking institutions. Underwriting criteria varies among funding houses, thus impacting a business owner’s rate of approval or decline.
An important detail to keep in mind is the difference between a cash advance and a loan. A cash advance is a purchase of a company’s future receivables over time in exchange for an immediate lump sum. While lenders do take factors such as creditworthiness into account during the approval process, cash advances place increased importance on the financial stability and growth-potential of a company.
Why would a business need a cash advance?
While there is no restriction on what a cash advance can be used for, common expenditures include:
- Emergencies and Unforeseen Expenses
- Marketing and Advertising
- Payroll, Bills, and Taxes
- New and Outstanding Orders
- New Equipment Purchases (if equipment financing isn’t an option)
Benefits of a Merchant Cash Advance:
- Very little paperwork and required documentation.
- Quick approvals and funding (1-3 day average process time)
- Closing usually accurs within 5 to 10 working day.
- Poor credit is not a disqualifying factor.
- The payback percentage is based on your future cash flow.
- No restrictions on the use of funds.
- No collateral or guarantor needed.