Merchant cash advanceWhat is Merchant Cash Advance?
Merchant cash advances make one of the best alternatives in business finance. Although the concept has gained popularity in the recent years, these loans are already is attracting many small and large firms in retail and the leisure industries. An MCA loan is lump sum money advanced against future sales of the business which uses credit/debit card terminal for sales. This type of cash advance is a viable option for that business which does not hold assets to pledge as collateral. If you are wondering what if the business does not have a good volume of credit card transactions? The repayment of of the loan will be taken as a proportion of sales on daily basis or whatever regular period mentioned in the agreement.
Who Can Avail Merchant Cash Advance?
Any business whether small or big which uses card terminal for collecting payments from customers with reasonable regular sales can avail the loan. The merchant that deals with the card terminal of the borrowing business will work with the lender to have a clear picture of the sales of the business. The information collected from the card machine merchant will make the processing free from credit checks or receive detailed information about your accounts. So any business that receives payments with card terminal is eligible for a cash advance. However, the loan disbursal totally depends on the lender’s decision.
Benefits of the Merchant Cash Advance
The repayment of the loan is made as a percentage of sales on a daily basis which will free the borrowing business from worries of making fixed payment irrespective of sales for that particular period. That means when sales are high you will be paying more money towards repayment and when sales are low, you will paying less amount which proves to be highly advantageous for small businesses with low working capital.
The lender deals with the collection of money directly with the card machine provider and not the borrower which means the repayment is collected directly from the source and not the bank account of the business. The borrower need not keep track of the business account or maintain balance in the current bank account to ensure payment is made to the lender.
Quick approval and hassle free processing
The lender collects most of the information from the card machine provider to decide on the amount of cash advance and the approval for the amount applied by the borrower. The borrower only needs to meet the eligibility criteria for the loan and provide required accounts and business plan to apply which is simple and easy and does not involve much of paper work. The loan is approved within 1 or 2 days of applying which is very fast when compared to traditional bank loans.
Although MCA loans are best options and offer several benefits for business with no assets to pledge, they are not completely free from drawbacks. The merchant cash advance loans mainly depend on sales and hence if your turnover is less there is a chance that the lenders may approve only partial loan amount.