Each year, thousands of business owners in New Jersey turn to MCA for extra cash. Although merchant cash advances aren’t typical loans, they allow you to get funding based on your credit and debit card receipts.
About Merchant Cash Advances
If you own a business, chances are a great deal of your income comes from credit and debit card sales. Merchant cash advances give you the power to get a quick cash advance based on your future credit and debit card receipts.
There are plenty of advantages of getting approved for a merchant cash advance. An MCA provides you with a rapid and hassle-free approval process. Many MCA providers won’t hold your credit history against you. When you get your merchant cash advance, you can use it to pay for a variety of expenses that are related to your business.
How to Qualify for a Merchant Cash Advance
To get approved for an MCA, you must be able to show that a large part of your revenue comes from credit card payments. Whether you’re a hair salon or a restaurant owner, an MCA can be a good way to obtain short-term financing.
In addition to your company’s credit and debit card sales, your MCA provider will review other factors before you receive your loan decision. This includes the amount of time you’ve been in business and annual revenue.
You’ll be required to complete an MCA application and provide supporting documents. The supporting documents that you’ll need include bank statements, a voided business check, business tax returns and credit card processing statements.
How Merchant Cash Advances Work
While you already know that an MCA provides a smart way for you to obtain working capital for your business, you should understand how they work. After all, you’ll be required to repay the advance according to the terms of your agreement.
After you’ve been approved for an MCA, you will be required to begin the repayment process quickly. By signing your MCA contract, you agree to provide your MCA provider with access to your credit card process or bank account.
Depending on your agreement, your merchant cash advance provider will withdraw a percentage of your daily or weekly credit card receipts. This amount will be used to repay the cash advance, fees and factor rate.
You should be aware that MCA providers don’t charge interest rates for your cash advance. The cost of your loan will be based on a factor rate that ranges from 1.14 – 1.48.
Here’s an example of how a factor rate affects an MCA. Suppose you receive a $20,000 cash advance with a 1.48 factor rate. The entire amount that you’ll be required to repay is $29,600, This amount doesn’t include any fees or additional charges for the MCA.
Are Merchant Cash Advances Worth It?
Before you sign an agreement for an MCA, you should carefully consider if this is the right short-term lending solution for you. A few things you should take into consideration are your daily income, current debt load and the reason you need the money.
If your money challenges are caused by a business downturn, it could be difficult for you to repay the money on time. However, if you know that you’ll be able to repay the money quickly because you have a steady flow of customers, an MCA might be a good option for you.
Merchant cash advances may not be suitable for every business owner. However, they can provide qualified business owners with an easy way to obtain business funding.