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Merchant Cash Advance Guide for 2022

A merchant cash advance loan provides a business with immediate access to funds based on future credit card receivables. This business cash advance works by providing a business with quick and easy access to capital in exchange for a reduced share of the company's future revenue receivables. Certain conditions must be completed to be approved for an MCA. One of the most crucial factors is that the company accepts credit card payments. Applying for an MCA at Merchantech is simple and quick through our online portal and can be done from a phone, tablet, or computer.

Even though merchant cash advances are a growing popular alternative source of capital for small businesses, it is a difficult challenge to find a company that provides.

What type of businesses can benefit from an MCA?

A merchant cash advance loan provider deducts a percentage of your debit and credit card transactions daily (or weekly) until the advance is repaid in full.

Unlike other business loans, merchant cash advances do not have standard repayment terms, because your sales determine your repayment time. Repayment duration might range between 3 to 18 months; the more credit card sales, the faster you'll pay back the advance.

Debit/Credit Card Sales as a Percentage

A merchant cash advance loan provider deducts a percentage of your debit and credit card transactions daily (or weekly) until the advance is repaid in full.

Unlike other business loans, merchant cash advances do not have standard repayment terms, because your sales determine your repayment time. Repayment duration might range between 3 to 18 months; the more credit card sales, the faster you'll pay back the advance.

Withdrawals From a Bank Account Regularly

Your credit card processing percentage will be subtracted daily and applied as a payment toward your account. Fixed repayments are made daily or weekly from your account in this situation, regardless of how much money you make in sales. The fixed payback amount is calculated using an estimate of your monthly revenue.

This MCA repayment structure allows you to calculate how long it will take to return the advance based on the amount borrowed.

Advantages and Disadvantages of Merchant Cash Advance

While merchant cash advances can provide quick cash infusion, the disadvantages should also be considered. Learning about the pros and cons of MCAs will help you make an informed decision as to whether or not this type of loan is right for your business.

    Advantages

  • Merchant Cash Advance Loan Fast Funding: Typically, applying for an MCA will require minimal documentation, and funds can generally be acquired within a week. You may also receive funds as early as the next day in some cases.
  • Low Credit Score Requirements: Merchant cash advance loan providers are frequently prepared to work with small business owners with bad credit. You also won't be required to offer collateral, a standard requirement for another business financing.
  • Payments May Vary Depending On Sales: If you choose a standard merchant cash loan, your payments will not be fixed if your sales fall. This may be less taxing on your finances than a traditional installment loan. Repayment of the loan amount will be based on a percentage of your credit card sales. The agreed-upon percentage will be deducted from daily credit card sales, and the remainder deposited into your bank account.
Disadvantages

High costs: APRs on merchant cash advances can quickly reach the triple digits, making it one of the most costly business financing tools.

Increased Sales quicker payoff: If your sales increase, you'll be able to pay off your cash advance more quickly as a percentage of your sales from your credit card processing is deducted daily and applied to your loan balance. However, unlike typical loans, where payment off the debt early saves money on interest, the interest on a merchant cash advance loan is fixed, whether it's paid before or as agreed.

Regular Payments Can Be Detrimental: If you choose to have recurring charges deducted from your bank account and your sales decline, having that fixed sum deducted from your account daily or weekly can strain your budget.

Personal Guarantee: While you won't have to put up any collateral, the merchant cash advance loan provider will almost always require private security, which means that if your business can't return the debt, you'll be responsible for paying it back with your own money and assets.

Repayment of MCA

According to various MCA providers, a business employing a merchant cash advance may pay back 20% -40% (or more) of the borrowed amount. This percentage is often expressed as a factor rate equivalent to 1.20–1.40. For example, if you have borrowed $40,000, and factor rate is 1.50, the lender will collect $60,000 ($60,000*1.35). In other words, the fee is 50% of the borrowing amount.

Note: There is a distinction between the daily holdback amount paid by a small business (as a percentage of their receivables) and the total repayment amount for the advance. For example, the business owner must grasp the difference between a 15% holdback and a 30% repayment.

    The holdback percentage is usually calculated using the following factors:

  • The amount of money received by the company,
  • How long will it take to pay back the loan and
  • The size of the monthly receivables.

What are the Benefits of Merchant Cash Advance Loan?

Merchant Cash Advance Loan has several advantages, including:

Flexibility: Your company only repays the loan when it gets credit card payments from customers, tying repayments to sales and allowing you to manage cash flow better.

Access: A merchant cash advance can be authorized 24 hours, depending on the lender and application process.

Unsecured - A sort of unsecured business funding is merchant cash advances. Because no collateral is required, it is less risky than traditional financing.

Application process: Traditional lenders may require a business plan when applying for a traditional loan, while merchant cash advance lenders do not.

Instead, a provider will examine your sales history. The lender may be able to see your merchant account statements online, saving you time by not having to send them by email or mail.

Credit ratings: Credit ratings are rarely considered because the lender obtains funding from having visibility into your sales.

Risk: Repayments are deducted automatically from funds received from consumer card payments. There's a lower chance of defaulting on your loan and paying late fees.

Transparency: The amount you repay remains constant. The lender will inform you of the complete cost upfront.

    Required Documents for a Merchant Cash Advance

  • Business ID
  • Credit report
  • Financial statements
  • Recent credit card processing statements
  • Recent business tax returns

Merchant Cash Advance Companies

There are many companies offering merchant cash advances, but not all are created equal. Some are more willing to work with those with bad credit, others may offer higher limits. Here's a breakdown to help you determine which might be a good fit for your small business.

Merchantech

A merchant cash advance from Merchantech may be one of the simplest methods for acquiring funding if you're a Merchantech customer.

Merchantech offers merchant cash advances (MCAs) through Merchantech Capital to companies that use its platform for payment processing. Because Merchantech works with carefully selected borrowers that use their service, these MCAs are less expensive than other alternatives.

National Funding

National Funding does not charge an origination fee on merchant cash advances. While small business owners will still be subjected to the higher interest rates associated with a merchant advance, National Funding offers one of the lower acceptance thresholds for this sort of business funding.

Can Capital

Getting a small company loan is challenging for business owners with weak personal credit or a thin business credit history, and it's even more difficult for newer business owners.

American Express Merchant Financing

American Express Merchant Financing is a short-term loan for businesses that accept American Express credit card payments.

Follow the steps below to apply for a Merchant Cash Advance

Step 1: Go to Merchantech to look over and compare all of the business loan choices available from major financial institutions.

Step 2: Fill out the basic information such as your name, phone number, address, loan amount, email address, annual turnover & profit, and so on to get the deal that best meets your business needs.

Step 3: After submitting the information, the Mechantech customer service representative will contact you to check the information you provided and continue discussing the selected loan package.

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