Merchant cash advances aren’t really loans. They are a cash advance based on the future sales your business anticipates it’ll receive. Business owners can apply for an MCA from Delancey Street by filling out our business funding application. Typically, our underwriters will review your application and based on parameters such as: collateral, credit score, business credit, etc, will decide which of our programs is the right fit for you. It’s typical for merchant cash advances to be approved as quickly as 24 hours after being submitted. Most cash advances have a holdback, which means they look at the daily credit card receipts and determine what % of the receipts can be held back as repayment. It’s usually somewhere between 10 and 20% – and it’s a fixed amount, until the advance is repaid completely.
Most merchant cash advances are based on credit card splitting, but now, many are based on ACH withdrawals on a daily, or weekly, basis. The biggest difference between the interest rate a business owner charges for a merchant cash advance and a a normal business loan is the interest rate. Most merchant cash advance companies charge a factor rate. Unlike traditional term loans, the rate isn’t amortized over the course of an advance. Most factor rates for a merchant cash advance range between 1.2 and 3.
Is a merchant cash advance right for my business?
An MCA can make sense for a business that needs cash fast in order to take advantage of an immediate opportunity. It’s important to make sure the costs of a merchant cash advance don’t outweigh the benefits of the opportunity. Qualifying for a merchant cash advance is a lot easier than small business loans. Merchant cash advances come with a premium cost. Because merchant cash advances aren’t loans, they aren’t reported to your business credit bureaus. It doesn’t help build, or strengthen, your credit profile. Additionally, rates vary from provider to provider.
Are there alternatives to merchant cash advances?
Yes. Many small business owners can turn to things like lines of credit, term loans, etc, if they have a strong credit profile.