What is an asset based loan? An asset-based business line…
Virginia Merchant Cash Advance
Virginia Merchant Cash Advances
Are you struggling to keep the lights on? Did a drop in sales make it harder to pay your employees? If funding your business is a challenge, you are not alone. While running a company is not easy, there are some options available for businesses that are short on cash. Through funding options like a merchant cash advance (MCA), you can get the money your business needs on the timeline you want.
A Quick Fix for a Funding Dilemma
A merchant cash advance is not a business loan. Instead, it is a pre-payment of money you will earn in the future. The MCA provider reviews two to six months of your company’s credit card transactions. They take the average sales each month and give you 50 to 250 percent of that amount.
Then, the funds are deposited in your account in as little as 24 to 48 hours. As soon as you get the money, you automatically start repaying it with your new sales. A holdback rate of 5 to 20 percent is taken out of your credit card transactions each time someone buys your products.
The total amount you spend on the MCA is determined by your factor rate. This rate is generally between 1.14 to 2. If you get an MCA worth $100,000 that has a factor rate of 1.14, you end up paying $114,000 back. For entrepreneurs stuck in a cash crunch, this style of funding is a viable option.
The Advantages of an MCA
From no collateral to fast applications, there are many reasons why people turn to an MCA. With this type of program, you get money right away instead of having to wait for a bank’s slow approval process to finish. You do not have to use collateral. Entrepreneurs can get an MCA with bad credit because an MCA is determined according to your sales.
– Funds are available in 24 to 48 hours
– Fast approval process
– Online, streamlined application
– Bad credit is not a problem
– Flexible repayment methods
– Large advances
When Should I Be Cautious?
Before you apply, make sure you know the benefits and drawbacks of an MCA. You can get the funds you need, but there is a price to pay. Every kind of funding charges an interest rate, factor rate or some other type of fee. An MCA is just the same. You pay a factor rate, so make sure you know how much the advance will cost before you apply.
This variety of funding is generally not the best if your business does not have credit card sales. It works well for ecommerce sites, dining venues and retail stores because these kinds of companies have constant credit card transactions. If your business rarely processes credit card transactions, an MCA might not be the right choice.
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.
The Bottom Line
Every type of credit card, loan or advance carries risk. If you research a merchant credit advance beforehand, you can reduce your risk and find out potential drawbacks early. Once you apply for an MCA, you can instantly get the money you need to keep your business going.