Believe it or not, merchant cash advance (MCA) business loans are a great option for small business owners looking for fast and easy access to capital. They’re an ideal financing solution for companies that have been denied a traditional bank loan or don’t have the time to wait around for a business loan approval.
So what exactly is an MCA, and how can it help your business? Read on to learn more.
What is a Merchant Cash Advance?
A merchant cash advance loan is a type of financing that allows businesses to borrow money based on future credit card sales. The loan is repaid with a percentage of the business’s monthly credit card sales, making repayment easy and flexible.
Are Merchant Cash Advances Right for Your Business?
To qualify for a merchant cash advance, you’ll need to have credit card sales. The amount of money you can borrow will depend on your sales volume. And, you won’t need to have a business bank account to qualify. One of the biggest benefits of an MCA is that it can provide much-needed cash flow for your business.
Best Merchant Cash Advance Companies
It can be hard to find trustworthy merchant cash advance providers for business loans. That’s why we put together this list so you can find the best merchant cash advance company.
1. Rapid Finance
With the Rapid Finance merchant cash advance provider, you can get small business loans between $5,000 and $500,000 as long as you have a 550 credit score, have been in business for at least three months, and have $5,000 in monthly credit card sales.
2. Forward Financing
To get a loan of between $5,000 and $300,000 with Forward Financing, you will need at least $10,000 of monthly revenue and a credit score of 500+.
3. PayPal Working Capital
PayPal Working Capital is for some sellers who have a Business or Premier account that’s at least three months old. You can borrow up to $97,000 on your first advance with no credit check.
4. CAN Capital
To qualify for a loan from CAN Capital, you’ll need to be in business for at least six months with $150,000 in annual revenue. You can borrow between $2,500 to $250,000 and can receive funds in two business days.
5. Fundera by Nerdwallet
The qualifications to receive Fundera small business loans are a 550+ credit score, $180,000 in annual revenue, and 2 years of minimum time in business.
6. Reliant Funding
Reliant Funding will loan you up to $400,000 as long as your business has been operating for at least six months and has on average $10,000 in monthly sales.
7. Libertas Funding
If you’ve been in business for at least six months, have annual revenue of $150,000, and have a 550 credit score, then Libertas Funding will lend you from $7,500 to $1 million.
Credibly will lend you up to $400,000 as long as you have a 500+ credit score, have been in business for at least six months, and have $15,000 in monthly sales.
Merchant Cash Advance Loan Requirements
Here are the requirements for getting an MCA loan, which is less strict in comparison to traditional loans:
- Business operations – You must have been in business for at least six months. This requirement is flexible, as some merchant cash advance companies will work with startups that have been operational for three months.
- Credit card transaction volume – You must have a minimum monthly revenue of about $5,000. This requirement is also flexible since some lenders will work with businesses that have a lower volume but may require a higher interest rate.
- Credit score requirements – You must have a personal credit score of 500 or higher. Some lenders will work with borrowers who have a lower score, but this may raise the interest rate of your loan.
- Repayment method – You must agree to repay the loan through a percentage of your daily sales by credit card. This is typically done through an automated repayment system, so you don’t have to worry about making manual payments.
- No red flags – You must not have any major financial problems, such as bankruptcy or foreclosure. If you do have financial problems, you may still be able to get an MCA loan, but again, the interest rate will be higher.
Benefits of Taking a Business Cash Advance
Cash flow is the lifeblood of every business, and business loans can provide the boost you need to keep your business moving forward. Here are five benefits of taking an MCA loan:
- Flexible spending – You can use the money for any business purpose, whether it’s to buy inventory, hire new staff, or cover unexpected expenses.
- Fast funding – You can get the money you need in as little as 72 hours, which is much faster than traditional bank loans.
- Easy repayment – You can repay the loan with a percentage of your daily credit card transactions, so you don’t have to worry about making fixed monthly payments.
- No collateral required – You don’t need to put up any collateral to qualify for a merchant cash advance, so it’s great for businesses that don’t have any assets.
- Bad credit? No problem – You can still qualify for a merchant cash advance even if you have bad credit.
Cons of Taking Merchant Cash Advance Loans
While these loans can provide a much-needed infusion of cash, there are also some potential drawbacks that business owners should be aware of.
- Can be expensive – An MCA loan is based on your daily sales, which means you’ll be paying a higher percentage of your credit card payments from sales in interest and fees than with other types of loans.
- Not regulated Federally – MCA loans are currently not regulated by the federal government, which means that there’s no standardization in the industry.
- Repayment terms can be inflexible – MCA loans typically have to be repaid within 6 to 18 months. If you’re unable to make your payments on time, you may be charged additional fees or your loan may be sold to a collections agency.
What Is a Merchant Cash Advance Used For?
A merchant cash advance is a type of financing that allows a business owner to borrow money based on future sales.
The amount that can be borrowed varies depending on the lender, but it’s typically a percentage of the business’ monthly sales by credit card.
Are Merchant Cash Advances a Good Idea?
Merchant cash advances can be a good option for businesses that need funding quickly and that do not have access to traditional forms of financing.
However, merchant cash advances can also be expensive, and they can put a strain on a business’s cash flow.
What Is a Merchant Cash Advance Agreement?
This is an arrangement between a business and a lender in which the lender provides the business with a sum of money upfront in exchange for a percentage of future sales.
This arrangement is typically used by businesses that have difficulty qualifying for traditional loans.
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