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Loan Consolidation Merchant Accounts and Credit Card Processing
Loan Consolidation Merchant Cash Advance
Businesses that are struggling often need an extra push of cash in order to stay above water. For business owners that have limited or bad credit, no collateral to offer for a loan, or simply need cash and need it in a hurry, the Merchant Cash Advance (MCA) is an ideal option. In this scenario, businesses that rely heavily on credit and debit card transactions to take in money are able to get a lump sum of cash up front from a MCA finance company, who in turn takes out a percentage of daily debit and credit card sales, in addition to fees. To put it simply, this type of advance is an advance on credit/debit card transactions that take place at your business daily.
Before merchants take out this type of advance, they frequently weigh the pros and cons of a MCA. While it’s a great way for bad credit borrowers to get the cash they need to either start up their businesses or keep it afloat, the interest rates remain higher for this type of advance, and so owners should carefully consider whether this is the right arrangement for them.
Holdbacks In MCA Arrangements
A holdback is a term used to describe the daily percentage “held back” from daily sales. In other word, it’s the percentage of sales that the MCA company is keeping back from your sales from debit and credit card payments. This number can range from 10-20% and because of this, it’s going to affect the cash flow into your business. However, if you’re a struggling business owner or need cash in order to fund a profit-making venture, then you’re going to be more than willing to sacrifice this amount of daily sales until you completely repay back the MCA.
Businesses who do a lot of credit card transactions per day can typically pay back an MCA much quicker than businesses who don’t do a lot of credit card transactions. As such, if your business gets tons of credit card sales, you could potential repay a merchant cash advance rather quickly, thus making it completely worth it to your business. Holdbacks are different than interest rates, which will still be included in the overall amount of the loan when it’s paid off.
Weighing the Pros and Cons
A merchant cash advance helps businesses that have very few other options. After all, sometimes you have to have a lump sum of cash to keep a business afloat, and if you’ve got bad credit, no collateral, or have already exhausted all other means of getting a traditional loan, then the MCA is right for you. The MCA isn’t really considered a loan. It’s simply a type of advance on your future sales that will allow you to get more money up front.
When you apply for an MCA, companies will look at your sales from credit and debit card transactions and estimate how much cash you will take in over a certain amount of time. Then they will advance you an amount of money that they believe is fair and that will be of the most help to you and your ongoing business venture. Terms can generally be negotiated, and it’s always wise to get economic advice on loans such as this from financial advisers who know about Merchant Cash Advance arrangements. The more knowledge you have before taking out a MCA, the better for you and your business. If a merchant cash advance feels like it’s the right option for you, it’s a great way to get cash for your business even if you have bad credit or no collateral.