Merchant Cash Advances Explained
In this economic climate, there’s no shortage of ways for business owners to receive quick funding for their businesses. A convenient way to get access to business funding is through a merchant cash advance (MCA).
If you’re a merchant and you haven’t received funding from an MCA, you could be missing out on a great business funding opportunity. Not only can your MCA application be approved quickly, merchant cash advance providers offer an easy way for you to repay your merchant cash advance.
A merchant cash advance is a type of business funding that is based on your daily credit card receipts. MCA providers will offer funding for your business in exchange for a portion of your future credit card receipts.
Unlike traditional business funding opportunities, you won’t be required to provide your MCA provider with collateral. As long as the provider has access to your future credit card receipts, you could be approved for a merchant cash advance.
Here are the steps that are required in order to get approved for business funding through a merchant cash advance.
1. Complete an application. Provide information about your business including your credit card receipts, business history and industry.
2. Your application gets reviewed. The merchant cash advance provider will review your credit card receipts to determine if you qualify to receive an MCA offer.
3. Receive your merchant cash advance decision. If you’ve been approved for an MCA, you’ll be required to sign a contract. This contract contains details about your merchant cash advance offer including holdback charges and factor rates.
4. Get your cash. You could receive your merchant cash advance funding in a day. Your MCA provider will deposit your approved cash advance amount into your business banking account.
How Holdbacks Affect Your Merchant Cash Advance
Merchant cash advances have holdback charges that are based on your daily credit card revenue. In many instances, merchant cash advance providers charge up to 20 percent of your daily credit card receipts for holdbacks.
Let’s explore how holdbacks can affect your merchant cash advance. Your business had $650 in credit card transactions on Thursday. According to your agreement with your MCA provider, the holdback charge for your total daily credit card receipts is 20 percent. Based on this agreement, your holdback charges for Thursday is $130.
Your MCA provider collects holdbacks automatically. Once a holdback has been collected, it will be applied as a payment to your merchant cash advance.
Holdbacks make it convenient for you to make payments toward your merchant cash advance agreement. However, holdbacks can decrease your monthly revenue. This might make it challenging for you to pay other expenses.
Understanding Factor Rates
When it comes to the convenient features of merchant cash advances, there are costs associated with using this type of business funding. A factor rate is the extra charge that you pay MCA providers in exchange for the funding.
Here’s what you’ll need to now about factor rates before you agree to a merchant cash advance. Factor rates aren’t the same as interest rates. Interest rates are calculated using percents. Factor rates are calculated using decimals.
You can expect the factor rate for your MCA to fall between 1.2 and 1.5. If you get approved for a $39,000 cash advance with a 1.3 factor rate, you can expect to pay $50,700 for the advance after it has been repaid.
Your MCA agreement includes a holdback percentage and a factor rate. Know the terms of your merchant cash advance before you consent to an agreement.
A merchant cash advance is one way for you to receive business funding. This information can help you decide if an MCA is a viable option for your business.
Managing any business takes a lot of skill and a great deal of attention to detail. It also requires the business owner to be aware of the need to have enough access to all forms of financing to keep the business in good shape. A business owner may need funds to acquire new items, store existing items and make sure that every single item they own and want to sell or items they are leasing are kept in good condition. They also need to make sure they can pay all those who work for them in any capacity are always paid on time. This includes suppliers as well as all employees. Part of being able to run that business well is being able to access the amount of funds needed. Modern methods make it possible to tap into varied types of credit. One such method is what is known as a merchant cash advance.
Merchant Cash Advance
A merchant cash advance is an innovative form of funding that is flexible, easy to use and provides access to the cash that all business owners need when they need it. Over time, many business owners in Wisconsin have discovered this system to be an ideal choice for their business cash needs. Working closely with a financial company offering merchant cash advances is easy and can be done at the employer’s convenience. Essentially, the financing company provides the Wisconsin merchant with cash. In turn, the company gets a certain percentage of the company’s daily credit card sales. They also get a certain percentage of the company’s debit card receipts. They also take money in the form of a small fee. Many Wisconsin business owners and managers find that there are many advantages using the merchant cash advance system as part of their overall financial planning.
This form of financing can also be used even for those who may not have the ideal credit score. Unlike many other forms of business financing, there’s no need to demonstrate that the business owner has enough collateral to qualify for access to the funds they need. The Wisconsin merchant cash advance can also be used to earn access to funds as large as a quarter of a million dollars or only a few thousand dollar. This can help the business owner avoid issues such as a lapse in bill payment that might other incur late fees and ultimately impact the owner’s overall credit rating. That can impact their ability to buy new items, hire new employees and expand into new markets.
Unlike some other forms of credit, this one is also extremely quick. Applying for certain forms of credit can take a lot of time. There’s no huge amount of paperwork to fill out only to wait for weeks to see the cash on hand. In the meantime, a Wisconsin business can watch with alarm as the bills start to pile up. However, taking advantage of the merchant cash advantage allows a way out of this problem. The funds can be in any business owner’s account in less than a week. In fact, it is possible to see the funds in the merchant’s account in as little as two days. Using this process provides the business owner with the peace of mind they need knowing they have the funds to run the business successfully.
A Small Fee With Big Results
This system only requires slightly over one percent in fees. For a tiny sum, the business owner has access to large amounts of ready cash. Unlike many other forms of credit, the business owner with less than perfect credit can also gain access to such funds. These funds are entirely suitable for many different business purposes. The Wisconsin business owner can choose to pay off a supplier on time, thus assuring better and faster services. They can also use the funds to help lure and keep talented individuals on the payroll. Employees who know they will always get paid and always get paid on time are employees who are likely to show more loyalty to their employer. The merchant cash advance is an easy, flexible, fast and truly modern reliable business tool.