Running a business is pretty expensive and at times you will require financial help. You will have to spend money to get new equipment or even bulk up the inventory. Like the old saying goes, you have to spend money to make money. For a business that is looking for capital, there are several options, varying from traditional small business loans to the popular merchant cash advance loans from a merchant cash advance company.
What are MCA?
A merchant cash advance is actually a form of funding where the third party lender or the credit card processor advances the money on the basis of the credit card sales volume. Here, the lending company is actually purchasing a portion of the future credit card sales. Rather than a traditional loan with a monthly payment, you will have to repay the advance through the process of automatic deduction from the daily credit card sales.
Merchant cash advance have loser eligibility require than the traditional business loans. You will not necessarily need good credit score for this. One of the main factors in deciding whether you are going to be approved for the loan from merchant cash Advance Company is if you have robust credit card sales. If you are able to show that your business is processing a lot of transactions through the card, you will surely have a better chance with the application.
However, the specifics might vary with lender. In general, you will qualify if:
- You current accept credit card and also process few thousand dollars every month
- You have been in business for a year
- You are seeking at least $10,000 in funds.
At times a merchant cash advance company, might have some additional requirement which includes the minimum threshold for credit card sales every month. However, the credit criteria will provide you with a starting point to understand the likelihood of receiving an advance.
Uses and Amounts
You can get merchant cash advances from $5000- $150,000 or more. The more money you look for, the more important will it be to showcase the volume of credit card sales.
You use the loan from merchant cash Advance Company for any type of legitimate business purpose which includes buying the equipment or inventory, training staff, advertising, and more.
Differences between Loan and Advances
Merchant cash advances are quite different from small business loans in certain ways. However, one of the biggest differences is that you will have to repay automatically through credit card sales with a fixed percentage. Rather than sending a loan payment once in a month, you will have the percentage of credit card sales deducted on a regular basis till the advance is repaid.
The good thing about a system like these in the merchant cash advance company is that during the times when you have low credit card sales, the payment is also going to be lower. You will not have to gather money in order to cater to the predetermined payment amount that can be a relief for a business which is suffering from a short of cash.
However, the bad thing is that if you do not have a predetermined amount, it might be difficult for you to budget accordingly. As you do not have control over the repayment, you will not be in control of repayment.