Despite the high cost that comes with a Merchant Cash Advance (MCA) there are three top reasons that make an MCA appealing to Small Business Owners as a solution to their funding needs.
1.) Quick Access to Capital
When a Small Business Owner has the opportunity to buy inventory at a great discount, or when an infusion of cash is needed to take advantage of an upcoming project, or when an important piece of equipment breaks down, the Small Business Owner finds themselves in need of fast funding.
Traditional Lenders such as Local banks and Credit Unions often have lengthy approval processes and eligibility requirements are quite strict and when a Small Business owner needs funding fast, a viable alternative is required.
Merchant Cash Advances can meet the needs for this type of fast funding as MCA’s mostly rely on the businesses daily revenue from credit card sales or daily bank deposits and rely less on credit scores and piles of paperwork.
MCA’s can have the funds available to the Small Business Owner within days, and in some instances, hours.
The MCA process can enable the Small Business Owner to take advantage of opportunities that can contribute to the growth of their business.
The MCA can be a great resource for seasonal businesses to address unexpected expenses and the speed of funding can help a to acquire inventory, launching a marketing campaign, or address an urgent cash flow gap.
2.) Flexible Repayment Structure
Traditional loans usually have a fixed monthly payment which can cause some stress to the Small Business Owner, while the MCA has a flexible repayment schedule that takes into consideration the sales volume of the business.
Since the MCA is repaid as a percentage of sales volume the payment can adjust to address slower sales and increase during peak sales periods.
This flexibility makes the MCA appealing to Small Business Owners that experience fluctuating revenue such as retail stores, restaurants, landscapers, and other seasonal businesses.
The flexibility of the MCA helps to manage the variations in revenues for the business.
3.) No Collateral Requirement
Traditional Loans often require some type of collateral, such as real estate, equipment, or stocks, to secure the loan which can be a barrier for Small Business Owners that do not have substantial assets.
MCA’s eliminate the need for the Small Business Owner to pledge any asset as collateral.
Rather than focusing on assets or credit scores, MCA’s rely on credit card sales and business revenue as reflected on bank statements to approve the funding.
As such, this makes MCA’s more accessible to Small Business Owners with few assets and low credit scores.
So even though the Merchant Cash Advance comes with higher costs, the MCA is a viable option for the Small Business Owner who has a low credit score, very little collateral, and a short window to take advantage of a growth opportunity.
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