The Difference Between a MCA and a Business Cash Advance

Business Cash Advance

Obtaining a business cash advance is something that’s considered by many small business owners. The reason for this is simple: They’re vulnerable to the downswings that happen to a new business. The first two years are volatile and they may have to borrow to fill some of the pitfalls that may happen along. But, there is an understandable trepidation about the undertaking. Until just recently, a cash advance was a risk because you would simply walk to a check cashing store and get one. If you didn’t pay it off on time, you ended up with high interest and possibly an overdrawn checking account. In other words, the old-school business cash advance wasn’t structured well.  Today, that type of loan has a much better, safer, structure. It’s a MCA or Merchant Cash Advance.

The difference between a MCA and a BCA:

Let’s approach the MCA with a certain attitude. The MCA is structured in a way that is better for the small business owner than a traditional BCA. The MCA is designed to take more data into consideration. Before you had to pay it back from the bank account and that was it. The MCA will instead purchase a percentage of your future income in order to pay back the loan; which by the way is not a loan, it’s a line of revolving credit.

Why would you obtain a business cash advance?

There are many reasons to obtain this type of credit. We will tell you that, it’s a good idea not to use it lightly. Make sure you really need it before you apply. There are always consequences for any type of credit when it’s used for frivolity. When it’s used responsibly, you’ll have it when you really need it.

The best way to use this type of credit is for equipment purchase; marketing costs or even an unexpected repair cost. The worst way to use it is when you are mismanaging money and now you are behind. Unless you are about to lose your business, this type of thing has to be approached with caution.

When you use a business cash advance for the things that really make a difference you can get ahead more quickly. It means you’ve bought yourself time to straighten things out that may have gone wrong. You can also use it to pay for improvements and upgrades. This can put you ahead of the game where you may have had to wait it out. Sometimes opportunity knocks only once and a MCA can allow you to jump on opportunities that present themselves. If you stay in good standing with your MCA company you can secure a future business cash advance for anything you need. It’s important to develop a good relationship with your MCA credit lender. From the beginning, it’s the best practice to have an honest and frequent line of communication with your credit lender. This can be one of the most important business relationships you’ll ever develop.



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