No matter what type of business you have, odds are you’ll need financing options. Every business runs into slow periods and every business needs a little help. When it comes to small business financing, there are so many options that it might be daunting to try to choose which one will work best for your company. One of the more common financing options, aside from traditional loans is the merchant cash advance. Here’s what you need to know.
What Is a Merchant Cash Advance?
An MCA or merchant cash advance is a short-term financing option. It is a quick and easy way for a business to attain cash quickly. MCAs are not traditional business loans and instead are when a business borrows against its future revenue. These are for businesses who get their revenue primary from debt or credit card sales. These are not technically loans. Instead, you get a sum of cash right away to use towards your expenses. You repay by making weekly or daily payments.
MCAs do generally have annual percentage rate. When you receive an MCA, you have to be prepared to pay the fees involved. When you need money fast, it can be a great option, but you do have to be prepared to pay on your debt after receiving the money.
Why Use an MCA
Often, businesses choose cash advances because they are quick. If you need money due to an emergency in the business or if you’re having a slow period, then these cash advances can give you money in as little as a week. In addition, you don’t have to fill out lengthy paperwork. Your provider looks at your daily receipts to ensure that you can repay.
Businesses may also choose this option because if your sales are down, then your payments will be too. The repayment schedule is based on the percentage of your sales. These payments readjust based on the amount of money that you are making.
Additionally, you don’t have to worry about losing your assets if you cannot pay. This is an unsecured financing option. This means that you don’t have to use collateral. If you fail to repay or if your company goes out of business, you don’t lose any assets or your home. In some instances, a provider may ask for a personal guarantee.
If you are looking for financing options for your business, then you might want to consider merchant cash advances. Keep in mind that these are best when you don’t have time to wait on a traditional loan. These cash advances provide you with a sum of money based on your future credit and debit card sales.