Merchant Loan Advance: All You Need to Know

merchant loan advance

Merchant Loan Advance, also known as Merchant Cash Advance or MCA, is a hot topic these days. Many small business owners are choosing an MCA as funding for their everyday business operations. However, if you are new to this term and do not have any clue what a Merchant Loan Advance is all about, then this article is for you. Here, you can learn everything about Merchant Cash Advance, what it is, how one can be acquired, what its benefits are, etc. So, let’s get started with Merchant Cash Advance and delve deep into this method of acquiring a loan for your business.

What is Merchant Cash Advance?

MCA is a type of cash advance, wherein a lump sum amount is provided to a business in return of a specified percentage of the company’s everyday credit card sales. This type of loan is a short-term funding option with a term less than one year. Whatever the company receives in its total everyday credit card receipts, the fixed percentage of this total amount is taken by the Merchant Loan Advance provider on a daily basis. This percentage is also known as the ‘holdback percentage.’ Moreover, you should not confuse Merchant Cash Advance with a typical loan, since the former is a cash advance and is based on the future credit sales of a company as previously stated.

Applying for a Merchant Loan Advance

Merchant Cash Advances are offered by different providers, most of which can be easily found online. If your business accepts payments from a credit card from its customers, then you can apply for a MCA. However, you need to ensure that your credit card payments are more than 2 years old and you have received a minimum of $50,000 in your credit card sales per year. This number can vary.

You can use Merchant Loan Advance for many things. Some of the primary reasons to opt for a Merchant Cash Advance are when you need to meet your short-term funding requirements, require working capital, or want a smooth cash flow in your business.

However, there are some prerequisites that you need to qualify for in order to get Merchant Cash Advance for your company. These include:

  •    You need to have more than 2 years of credit card payment receipts
  •    You should have over $50,000 sales from credit card in a year
  •    You should have a personal credit score of over 500
  •    The credit card processor you employ should be associated with the MCA supplier you choose

This eligibility criterion is mostly the same for a majority of the Merchant Loan Advance providers. However, there can be slight modifications to these depending on the Merchant Cash Advance supplier you choose. For instance, the amount of $50,000 earned in credit card sales can be more or less for different Merchant Cash Advance providers. Moreover, it also depends on the amount of cash advance that a business is hunting for.

Furthermore, MCA providers place such qualifications for business owners seeking this funding option, so that they can assess the risk and evaluate the credit condition of a company as well as its owners. Merchant Loan Advance suppliers characteristically look at the everyday credit card sale receipts and daily receivables of the company. This is done to comprehend whether the business can repay the cash advance within an appropriate time period, which is usually between 1 to 2 years.

The application process of Merchant Loan Advance is very simple as well as quick. The typical application form of Merchant Cash Advance is only of 1 to 2 pages. First, you need to fill out the application form and provide additional documentation. Then, the MCA provider will look into certain things as mentioned above and approve your application only if they are satisfied with your annual credit card sales revenue. Then, you need to set up your credit card processing, after which you will receive your cash advance. After this, the Merchant Loan Advance provider will get their daily repayments automatically from your merchant account.

Advantages of Merchant Cash Advance

MCA has a lot of benefits for business owners. Let us look at some of the key advantages of going for a Merchant Loan Advance.

  1.    Flexibility: Merchant Cash Advance is a very flexible funding option for your small business since the repayments in this type of financing depend on your revenue schedules. This means if your credit card sales are lower one day, the repayment will be lower too on that day and if the credit card sales are higher the other day, so will be the payback. This makes it easy for businesses that deal with huge vacillations in their sales.
  2.    Fast approval: You can receive a MCA as fast as 48 hours after submitting your application. Generally, the approval of a MCA ranges from 2 to 5 days. This is helpful for businesses that need quick funds for their business, such as if they want to grab an opportunity immediately or just smoothly run their daily business operations.
  3.    Quick cash: Through a MCA, you can get quick funding for your venture. You can expect to receive the lump sum amount within 2 to 5 days of applying for a Merchant Loan Advance.

Should you go for a Merchant Loan Advance?

Merchant Cash Advance is a great option for small business owners looking for quick funding for their small business, instead of opting for a conventional working capital loan. Although MCA is an expensive choice, it can be repaid early as well as flexibly depending on your credit card sales during that period. This means that in slow business months, you can repay relatively less as compared to higher selling months.

 

Additionally, Merchant Loan Advance is a likely option for business owners, who have a low credit score and cannot find any other short-term financing options. You just need to have a certain amount of money on your annual credit card sales and received credit card payment receipts for a minimum of 2 years. If a traditional loan is not your cup of tea, then a MCA can surely fulfill your short-term business goals and objectives.

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