The merchant cash advance is a business alternative for companies that cannot easily qualify for a traditional loan. Sometimes, depending on the economic climate, your company (usually an SMB) has the necessary sales. However, lacks the business history and/or creditworthiness to qualify for a loan with favorable rates. In such a case, the merchant cash advance provides you with funds right away, in exchange for a portion of future sales. Typically, taken daily or weekly directly from your bank account by the MCA company.
Merchant Cash advance Requirements and Attributes
Your business must of course demonstrate an ability to pay back the funds daily (or weekly, depending on the drafted terms). The assessment is made by the MCA company, of course, and is dependent on the following:
Your present and projected credit card sales
The bank statements of your business (not your personal records)
Your commercial sales now, as well as projected
After this assessment is made, the merchant cash advance company will forward you anywhere from 855 to 160% of the revenue (calculated monthly) raked in by your business. Your repayment amount is determined by an industry-standard ratio called the return factor. You can expect the term of the repayment to span 5-15 months on average, via a retrieval rate of 8-15% of sales. This means that in seasons of low sales or high sales, you are not overburdened in repaying the merchant cash advance.
The MCA Has Its Advantages
The chief advantage is mentioned above. Since it is a percentage of sales, your business sales are always enough to pay back the MCA company. Although the financing can sometimes be expensive, this is a necessary way to offset the risk the company is undertaking by not factoring in the traditional markers of creditworthiness. You can also minimize this cost by choosing merchant cash advance companies wisely.
For more help with general financial matters, do not hesitate to reach out to us at Jasema Capital. We have experts with many decades of experience.