If you are low on cash and need a quick source of funds with lenient eligibility requirements, MCA financing is what you need. Merchant cash advances are ideal for businesses with low credit and minimal collateral, making this a timely solution when you need to fulfill urgent business obligations. To break it down, we discuss how merchant cash advances work and their pros and cons.
How Merchant Cash Advances Work
MCA funding works by advancing business owners with upfront cash that is then paid back by deducting a portion of their sales revenue. A few areas that you can use your merchant cash advances include business expansion, cash flow gaps, and seasonal costs. Unlike other sources of financing, this funding comes with flexible payment plans, allowing businesses with low sales volume to adjust their payments during low sales cycles.
Pros of Merchant Cash Advances
Large Borrowing Limits
Merchant cash advances will often range anywhere from $5,000- $400,000, allowing businesses to benefit from high borrowing limits. Getting large borrowing limits will, however, depend on your revenue, with more sales giving you room for more spending power.
While credit scores ratings will often cause concern among numerous small and struggling businesses, MCA comes with lenient qualifications. Lenders are more interested in credit card processing statements, allowing them to view the daily payment plans needed to recover their cash.
Fast Application Process
Merchant cash advances are generally one of the most straightforward funding options that offer a fast application process. Approval processes can take as little as a day, with businesses receiving their funds in just a few days. This is made possible by the lenient regulations offered to lend companies, helping speed up the process.
Cons of Merchant Cash Advances
Does Not Offer Prepayment Incentives
Traditional loans often offer business incentives for paying back their loan quickly, with the incentives allowing companies to lower their interest rates. Merchant advances do not provide this incentive, meaning the interest rates remain constant for the loan offered.
Does Not Build Your Credit Score
While some loans will help build your credit score by factoring in your payment schedules, MCA funding may not provide this benefit. This means your credit score remains stagnant, limiting your borrowing power in the long term.
The benefits of getting MCA financing outweigh the cons, with this financing option coming in handy for businesses that are hard-pressed for capital. If you need help securing the proper funding through fluctuating seasons, consider reaching out to Commercial One Group today.