The Basics of Merchant Cash Advance

The merchant cash advance is one of the most versatile forms of short-term financing for small businesses that have a lot of income generated through electronic transactions. That’s because it uses your income through the merchant account’s deposits as the basis for a short-term advance, tying the payment to a percentage of those transactions each month. As a result, you can get the working capital you need to optimize your approach to high demand seasons and other short-term opportunities.

Applying for an Advance

Applications for merchant cash advance programs are typically simpler and easier than for long-term loans used to purchase assets. That being said, you’ll still need to disclose income and probably your credit score, as well as information about your merchant account’s monthly business volume. The account’s value is the primary factor in the advance’s approval and size, but the rest of your finances are used for context, so they do matter. That being said, it’s a little easier to get an MCA with credit issues on your record than it is to get a traditional business loan with them.

Variable Repayment

With a minimum monthly payment that’s tied to your income, the merchant cash advance is designed to stay out of your way while cash flow is tight, so you don’t wind up having to use the working capital to pay back the advance. This is offset by the way the payments dial up with your increase in business as things get busier. Well-calculated use of the advance can even result in payoff within a single month under the right circumstances. For example, package liquor stores often make use of advances like the MCA to stock up before major holidays and sporting events in the area.

Reusable Working Capital

If your income is consistent and you’re looking for periodic injections of working capital for major investments, you can apply for a new advance whenever you have paid off the last one. You don’t need to tie it to a purchase or wait until your income is low enough you need the advance to keep cash flowing, you can just use it to inject lump sums of capital regularly and grow your business, buying larger inventory orders and expanding your customer base. It’s a great way to consistently invest in the moves you need to make leaps forward in your total market share, sales volume, and overall income. The better you get at using this cycle to grow, the faster each advance is paid back.


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