Use a Merchant Cash Advance Loan to Grow Your Business
It can be difficult to get a loan to expand your business from the bank. You can open a business credit card to get a short-term loan. However, if all of these don’t fit right, you can consider a merchant cash advance. This has really become popular in recent times.
What is MCA?
This is exactly what is appears like. It is a cash infusion that is readily available. Hence, it will be useful for business in the retail category or restaurant when a large amount of capital is required for inventory expansion, renovations, or new equipment.
The merchant cash industry is pretty young but it has grown at a rapid pace. Usually, banks are reluctant to lend money to a new or small business. These lenders are going to fill the gap in the funds availability. You should be aware of the fact that MCA can be pretty substantial. However, as long you are aware of the risk and how you will be able to make the payment, it can be a solid alternative to try out for a bank loan.
How Does it Work?
You will be able to get cash in advance in exchange for the part of the future debit or credit card sale. The merchant cash advance company is purchasing future card sales for a discount sale. A factor rate is used for calculating how much you will be able to repay. This is the merchant cash advance Company’s way of assessing the risk amount. The more risk the business, the higher is going to be the factor rate.
Things which go into the calculation of the factor rate will include the length of time for which you have been in business and your average monthly sales. It will also depend on the industry. Once you are able to get the rate, you can simply double the amount that you will need by this rate in order to find out the amount of the future card sales which you have to sell to the cash advance provider.
One of the benefits of merchant cash advance is that the MCA is paid through the percentage of the future card receipts. This means that the sales will go down. Hence, less money is going to be taken from the overall revenues. The cash flow isn’t reduced as much that can help out the business to keep operating if you are experiencing a downtime in sales or go through some seasonal fluctuations.
You will be able to pay the vendor with weekly or daily dates from the account. The second approach is known as Automated Clearing House or ACH withdrawal. Keep in mind that since a MCA company is purchasing a fixed amount of card sales in future, you are not going to gain an advantage by paying the amount at a faster rate. Also, you will not be penalized if you take longer to purchase the price.
On the basis of the merchant cash advance company you have chosen, there is going to be an application for you to fill. You will come to know very soon if you have been approved. A big bonus of merchant cash advance is that they are quite unsecure. Thus, you will not require any collateral or put your home on the line. Get more insights on financial news here!