All small to medium-sized businesses have cash flow as a vital aspect that needs to be considered at all times. Cash is really important because it is needed for paying suppliers, maintaining inventory and business growth. As the recession hit, it became obvious that cash flow is more important than ever. A business that needs to look for cash will have access to different aids, with the merchant cash advance (MCA) being among the most popular. It has been used by companies as in the video for getting out of tight situations.
Basic Things to Know
The MCA gives an alternative business funding source that the entrepreneur can use when collateral or credit rating is lacking. As opposed to the regular loan, an MCA means buying a part of the future business credit card sales for a specific discount. The company receives a lump amount when the contract is signed. In return, the provider has the right to take out a part of the credit card sales of the business every single month until the contracted amount is reached.
Merchant Cash Advance Advantages
This business loan alternative is attractive because of different benefits, including the following:
• No Need for Collateral or Credit – The merchant cash advance will be a relatively safe way to receive cash. Commercial loans can affect credit ratings, but the MCA will depend on future sales. That is why it is not present on any credit report. Losing collateral is not a risk, no matter what happens with the business.
• Fast Collections and Applications – Funding will always be really fast, and the process is straightforward. A commercial lender will evaluate tax returns, financial statements and the current business plans. Providers will usually think about 2 main facts: length of time business and monthly returns through credit cards. If there are credit card sales of over $5,000, as an example, getting accepted is almost always a certainty.
• Fast Cash Access – There is not much paperwork that is necessary, so the turnaround of the MCA is very fast. A commercial loan can even take months until being processed, but the MCA funding is usually available in under seven days. This is a particularly important benefit when immediate funding is needed.
• Really High Approval Rate – When we compare the approval rates of the MCA and of the regular commercial bank loans, it instantly becomes obvious that the MCA has the highest approval rate. In fact, the advances are rarely denied, as negotiations are normally started when some problems are noticed.
• Collections Based on Revenue – A big problem with commercial bank loans is that when sales are not made, the company will have problems making the monthly payments. With the merchant cash advance, this is not a problem since repayment happens only when the company makes money.
On the whole, while the commercial loan is a really important possible funding source, in some cases the merchant cash advance will be preferred due to the benefits mentioned above. If you want to learn more about MCAs, you can get in touch with a professional here: MerchantMoney.
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