Believe it or not, merchant cash advance (MCA) business loans are a great option for small business owners looking for quick and easy access to capital. They are an ideal financing solution for businesses that have been turned down for a traditional bank loan or don’t have time to wait for a business loan to be approved.
So what exactly is an MCA and how can it help your business? Keep reading to learn more.
What is a merchant cash advance loan?
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 company’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 will need to have credit card sales. The amount of money you can borrow will depend on your sales volume. Plus, 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 to your business.
Best Cash Advance Companies for Merchants
It can be difficult to find reputable cash advance providers for business loans. That’s why we’ve put together this list so you can find the best merchant cash advance company.
1. Fast Funding
With merchant cash advance provider Rapid Finance, you can get small business loans between $5,000 and $500,000 as long as you have a credit score of 550, have been in business for at least three months and you have $5,000 in monthly credit card sales.
2. Term financing
To obtain a loan between $5,000 and $300,000 with term financing, you will need at least $10,000 in monthly income and a credit score of 500+.
3. PayPal working capital
PayPal Working Capital is for select sellers who have had a Business or Premier account for at least three months. You can borrow up to $97,000 on your first advance without a credit check.
4. Capital CAN
To qualify for a loan from CAN Capital, you must have been in business for at least six months with an annual income of $150,000. You can borrow between $2,500 and $250,000 and receive funds in two business days.
5. Fundera by Nerdwallet
The qualifications to receive Fundera small business loans are a 550+ credit score, an annual income of $180,000 and a minimum of 2 years of time in business.
6. Funding Dependent
Reliant Funding will lend you up to $400,000 provided your business has been in operation for at least six months and averages $10,000 in monthly sales.
7. Libertas Funding
If you have been in business for at least six months, have an annual income of $150,000, and have a credit score of 550, Libertas Funding will lend you $7,500 to $1 million.
Credibly, it will lend you up to $400,000 as long as you have a credit score over 500, have been in business for at least six months, and have $15,000 in monthly sales.
Merchant Cash Advance Requirements
Here are the conditions required to obtain an MCA loan, which are less strict than traditional loans:
- Business Activities – 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 up and running for three months.
- Credit Card Transaction Volume – You must have a minimum monthly income of approximately $5,000. This requirement is also flexible since some lenders will work with businesses that have a lower volume but may charge 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 increase the interest rate on your loan.
- Repayment Method – You must agree to repay the loan by a percentage of your daily credit card sales. This is usually done through an automated redemption system, so you don’t have to worry about making manual payments.
- No Red Flags – You must not have major financial issues, such as bankruptcy or foreclosure. If you are in financial trouble, 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 any business, and business loans can give you the boost you need to move your business forward. Here are five benefits of taking out an MCA loan:
- Flexible spending – You can use the money for business purposes, whether it’s buying inventory, hiring new staff, or covering 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 fixed monthly payments.
- No Collateral Required – You don’t need to post collateral to qualify for a merchant cash advance, so it’s ideal for businesses that don’t have any assets.
- Bad credit? No problem – You can still qualify for a cash advance even if you have bad credit.
Disadvantages of taking merchant cash advance loans
While these loans can provide a much-needed cash injection, there are also some potential downsides that business owners should be aware of.
- Can be expensive – An MCA loan is based on your daily sales, which means you’ll pay a higher percentage of your credit card payments on sales in interest and fees than with other types of loans.
- Not Federally Regulated – MCA loans are currently not federally regulated, which means there is no industry standardization.
- Repayment terms can be rigid – MCA loans usually have to be repaid within 6-18 months. If you are unable to make your payments on time, you may be charged additional fees or your loan may be sold to a collection 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 by lender, but is usually a percentage of the company’s monthly credit card sales.
Are merchant cash advances a good idea?
Merchant cash advances can be a good option for businesses that need funding quickly and don’t have access to traditional forms of financing.
However, merchant cash advances can also be expensive and can strain a business’ cash flow.
What is a merchant cash advance agreement?
It is an agreement between a company and a lender in which the lender provides the company with a sum of money up front 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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