Why MCA Asset Based Lending is the Smart Choice for Small Businesses

Asset based lending

Learning about various types of loans can be overwhelming but asset based lending choices are some of the easiest to secure in the least amount of time.  They’re flexible and offer the simplest variety of repayment options for small business owners.

So, who should apply for this type of loan and what’s the recommending choice? A MCA or Merchant Cash Advance is one of the safest ABA with the least amount of risk. Here’s why: There are several ways an asset based lender will use your assets. Before we get into the meat of that, we should make one point very clear; the ABA is not a loan per se. It’s a way to establish a revolving line of credit with your assets as collateral.  Now, this can be a big deal or an easy and not so scary deal which is why we want to go into the MCA choice.  When it’s a bigger deal: This means the company you secure your asset based lending credit line with attaches your property. The asset can be your home, car, boat or in the case of a business it’s all your business assets.

Why an MCA is the better asset based lending choice

A MCA loan is much better and offers a safer aspect when you offer up a percentage of your profits to pay for the credit line. We don’t say loan because it’s a far cry from a secured bank loan. The MCA Company will make an assessment according to the raw data you have on your profit, loss and assets. It depends on the company what they’ll actually consider. Most MCA asset lending companies will work with fledgling companies that are typically considered to be 2 years old or less. And, most will always work with those that are more established because there’s more data to look at.

What about the borrowing base?

Here’s how that works, and it’s quite simple: The asset based lending MCA company will typically lend 75-80% of what the company’s accounts receivable is. So, in other words, the reason it’s so low risk and the best choice is because they only do 50% of lending based on your physical assets. Most of the time if you don’t have a lot of equity in the business but a lot of heavy physical equipment, then and only then will they offer this rout. But, most times it’s from your future profits. This leaves you safe in case you ever have to close for unforeseen reasons.

MCA asset based lending is worth it just for the peace of mind

Think of it this way: Though you’re paying with a percentage of profits, you’ll get what you need if you use the line of credit responsibly. Again, we don’t call it a loan because it acts like a revolving account–like a credit card that you continuously spend on and pay back. There’s a peace of mind that you have when you know that your physical assets are protected. The government does not define an MCA as a loan so you’re protected at all costs.


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