Merchant Cash Advance as a Working Capital Loan

working capital loan

A working capital loan is acquired for improving the cash flow or liquidity of the company. It gives you sufficient capital for maintaining your operations on a day to day basis. The amount of loan that you receive is a lump sum, and its usage does not have any bounds. This amount can be used for extending the business operations, upgrading equipment, and in reinventing the campaign of marketing. This all can help you in moving ahead financially.  

MCA is the type of working capital loan, which can be repaid quickly on a daily basis in manageable and small repayments. It is very simple and easy to qualify for an MCA as there is no condition involved regarding the utilization of funds.

1) What are the advantages of a working capital loan?

These loans are a perfect choice for small organizations of various kinds like auto repair, restaurants, and HVAC. If you talk about Merchant Cash Advance, then a small business firm must be dealing in debit and credit card transactions.

a) Simple payment terms

Merchant Cash Advance is repaid in a short amount on a daily basis. It is repaid as a fixed percentage of daily revenue receipts of the company. You don’t have to be worried how you are going to pay off your loan during the time of slow sales as the amount deducted is a part of the total revenue sales of the month and not a fixed lump sum amount.

b) Flexibility in spending

Merchant Cash Advance as a working capital loan offers you a lot of flexibility in using the money that has been provided to you. You can use the acquired funds for growth, meeting daily needs, and in buying assets. Some other great things about MCA are:

  •    Simple and convenient application process
  •    Quick approval
  •    Funds get transferred quickly after obtaining the approval
  •    Regular repayments
  •    No requirement of collateral security
  •    Manageable and small repayments
  •    Offers loan to companies with poor credit

2) Application process of obtaining MCA working capital loan

A Merchant Cash Advance does not take more than 2 to 3 days in sanctioning the cash advance to a borrower. When the application gets approved, the loan amount gets transferred to the bank account of the borrower.

The application procedure is very convenient and simple, which is why it is also called as the fastest business loan option. Mentioned below are the steps that you are required to follow if you apply for an MCA.

a) Apply for MCA

The application form that you are required to fill does not contain more than 2 pages. Plus, there you will have to fill up your tax ID of business, social security number, and other necessary details related to the business.

b) Provide necessary paperwork to acquire the MCA working capital loan

You will be required to submit a few years of information related to payment processing together with your bank statement.

c) Get approved

Once all the required documents are submitted, it will only be a matter of 1 day and your MCA will get approved.

d) Setting up credit card processing

It is quite possible that you may have to switch your payment processing company if you are going for this source of working capital loan. This is a necessary condition at the time of receiving approval from the cash advance providers.

e) Finalizing the details

If a small company gets a cash advance of 10,000 dollars, then they will be obligated to repay 13,000 dollars. The account of the merchant will get debited by 15% every day until the total amount of 13,000 dollars is paid back. It is very significant for you to understand the terms of payment as the repayment may begin from the next day itself.

f) Acquire the funds

Once all the things are done, the total amount of loan gets transferred from the provider’s account to the bank account of the small company and then the repayment of MCA will begin.

3)MCA working capital loan costs and repayments

A small business that chooses MCA as its financing option is required to pay back 20 to 40% of the total cash advance amount. There is a very big difference between the cash advance amount to be repaid and the holdback percentage. Repayment rate and holdback rate always differ from one another. The proportion of amount to be held back is dependent on the amount of funds that the small company acquires, the time it takes in repaying the MCA working capital loan, and the size of monthly receivables.

For instance, the company acquired the cash advance of 10,000 dollars and concurred to the condition to repay 13,000 dollars, which means the factor or payback rate is 30% of the cash advance amount. The company agrees to hold back 15% of the total transactions made with credit card till the whole amount 13,000 dollars get collected. If the company is earning an average of 14,500 dollars in a month, then it will be obligated to hold back 2,160 dollars every month, and the amount of MCA will get repaid in not more than six months.

So, this was all about MCA as a working capital loan. If a small company is looking forward to meeting its working capital requirements, then the only place that they need to go to is the Merchant Cash Advance providers, and they will satisfy all their financial needs.

What more can you ask for, when you are getting ease in using funds, loan assistance even with bad credit, and a flexible procedure of repayment. MCA providers have made it easier for small companies to acquire funds and now with a quick and simple procedure of application, they can devote their time towards their work and to increase their sales. MCA working capital loan is the most appropriate choice for startups and small companies.

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