Franchise Merchant Cash Advance[yoast-breadcrumb]
Franchise Merchant Cash Advance
Does your business need up to $250,000 to hire new employees or fulfill a large order? If that sounds like your company, a merchant cash advance (MCA) may be an ideal way to get the funding it needs in a hurry. Since you are not applying for a loan, there is no need for a credit check and no need to put up collateral to get the working capital.
What Is a Franchise Merchant Cash Advance?
An MCA allows you to receive cash today based on anticipated future revenue. The advance provider will charge a factoring rate of anywhere between 1.1 and 1.5. This is equivalent to an interest rate of 10 to 50 percent. The factoring rate will be based on a number of factors including the amount of the loan and track record that your company has making money.
How Much Can My Business Borrow?
The amount that your company is advanced is determined by your company’s revenue over the past several months. As a general rule, you can get anywhere from 50 to 250 percent of that figure. Once you receive the cash, you start to repay the advance over a period of three to 24 months. Your first payment is made the day that money arrives in your checking account. The retrieval rate is usually about 10 percent of however much is deposited into your merchant account.
Use the Money For Almost Any Purpose
The money that you receive can be used for any reason that you can think of. For instance, it could be used to lease equipment or pay off an old tax debt. It could also be used to make sure that vendors and employees get paid in a timely manner. If necessary, the money can be kept in a bank account as a cushion in case you expect your expenses to grow suddenly in the next few months.
What Types of Franchises Benefit Most from MCA Funding?
Almost any type of business can benefit from having an MCA. Typically, restaurants and other companies that have smaller margins will ask for an advance on credit card transactions. It is also ideal for companies that have just started out and don’t have the ability to get funding from a traditional lender like a bank or credit union.
Since an MCA has no bearing on your credit, there is no drawback to at least inquiring about funding. It likely won’t show up on a business or personal credit report, which means that you don’t have to worry about an inquiry lowering your credit score.
Are There Any Drawbacks to a Franchise MCA?
There may be downsides to getting an MCA as opposed to getting another source of funding. The amount of interest that you pay to the cash advance provider may be higher than what you would pay to a credit card company or other financial institution. Furthermore, since you are getting an advance instead of a loan, it won’t have any impact on your credit score. This means that you can’t improve a bad score or enhance a poor credit history by repaying the advance in a timely manner.
If your company could use an infusion of capital, a merchant cash advance is an effective way to get it. In a matter of hours, you can have hundreds of thousands of dollars in your company’s bank account. The application process is easy and quick, which means that you spend less time asking for money and more time focusing on your business.
- Credit card statements
- Voided business check
- Credit card
- Business tax returns
- Bank statements
How the Merchant Cash Advance Works
Every business will need to have some extra cash to work. However, it takes time for you to apply for loans. There is a chance that you will not get approved for a loan. That is why many people turn to merchant cash advances.
Merchant cash advances can be structured in two days. You can get the funds in exchange for your future credit or debit card sales. You can also get daily debits taken from your bank account.
It is important to note that you will have to pay additional fees. The merchant cash advance provider will charge you a factor rate. The rate will typically range from 1.2 to 1.5 percent. You will need to multiply the factor rate by the amount you borrow to determine how much you will have to pay back.
For example, you take out a merchant advance for $40,000. The factor rate is 1.2. You will end up paying back $48,000. A merchant cash advance can be expensive.
Pros of Getting a Cash Advance
- You can quickly get the funds that you need.
- It is easy for you to get approved.
- You can get approved even if your credit is bad.
- It is suitable for all types of businesses.
Cons of Getting a Cash Advance
- The fees that you pay for a merchant cash advance are higher than the ones for conventional loans.
- Your cash flow will be reduced because you have to pay back the merchant cash advance provider.
- It can be hard to change merchant cash advance providers.