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Entrepreneurs need capital to run a business. While this capital normally comes from sales, slow months can happen from time to time. Sometimes, you may get into a cash crunch and need extra capital to fund your business. With a Manhattan merchant cash advance (MCA), you can easily get the capital you need to keep your business going.
Cash for Businesses When They Need It
A Manhattan merchant cash advance is essentially a pre-payment for your future earnings. The provider considers your history of credit card sales for the preceding two to six months. Then, they use this information to give you an advance on future sales. You can get 50 to 250 percent of your normal monthly sales through an MCA.
The approval timeline takes merely a couple of hours to complete. Once your company has been approved, you can get the funding in your account in two days or less. This variety of funding works best for retail shops, restaurants and other companies that have a consistent source of credit card sales, but other businesses can use it as well.
How Is It Paid Back?
Once you have the MCA in your account, you instantly start paying the money back. The repayment amount is based on a percentage of your sales. In most cases, this is about 5 to 20 percent of your daily credit card intake. Since it is not a fixed payment, you only pay according to what you make.
The entire amount you pay is determined according to your factor rate. This is often around 1.2 to 1.5. This rate is set according to your company’s risk profile. Whether you take a week or 24 months to pay back the advance, you end up paying the same factor rate. Because of this, it is important to consider the factor rate carefully before you get the funding.
The Benefits of an MCA
With an MCA, you do not need good credit, collateral or a lot of paperwork. All of the forms are turned in online, so you can finish the application from any location that has an internet connection. Collateral is not required because the MCA is given according to your sales and not your credit.
This variety of funding is ideal for business that need cash flow immediately. A term loan or business credit card may take weeks to get if you can manage to qualify for it. With an MCA, you get the cash you need within two days. In some cases, you can get approved and have the money in your account within only 24 hours.
What Are the Drawbacks?
Every funding source has some advantages and disadvantages. While an MCA gives you cash quickly, it can be expensive. If you have a high factor rate, you can end up spending a lot to get fast cash. In addition, you may end up paying on the advance longer than you expected. If your sales are too low, the amount you pay each month is less than expected. As a result, it may take you a bit longer to pay back the MCA.
To make sure that you get a good deal, make sure to do your research first. Look at the factor rate and decide if fast cash is worth the cost. Businesses can use an MCA to get the funding they need, but it is important to do your research before you apply or get an advance. If the numbers look good, then this might be the funding choice for you.