A merchant cash advance (MCA) is a flexible way to borrow money for retail businesses or other companies with a reliable cashflow. If you own a small or medium sized business and take care payments, then a MCA offers a number of advantages.
As an alternative finance solution, a merchant cash advance is available to businesses which have processed credit and debit cards for four months or more. It provides a fast and short term finance option, calculated by the average monthly card turnover. This type of finance is a perfect fit for pubs, restaurants, beauty salons, hotels and shops – but many other businesses can benefit too.
There are many advantages of securing a merchant cash advance – here are the top reasons to choose this alternative finance product.
Revenue based payments
One of the best parts of this solution is the flexible repayments. Because the finance is loaned from the amount of card payments, the lender will take a percentage of your revenue rather than a set monthly amount. Sometimes, other non-related card income is also taken into account. This means that this type of loan really works alongside a business – in months with higher sales you’ll pay back more, and when you’re having a quiet period your business funds won’t all be spent on repayments.
MCAs are based on positive cashflow rather than credit scores and risk evaluation. Therefore, lots of businesses that have been refused traditional loans will be eligible for this type of finance. If you take card payments on a daily basis, you will be able to make your repayments, so there’s a high approval rate.
Typically, applying for a business loan is a long and tiresome process – even when you’ve been approved it can take weeks to receive the cash. With a merchant cash advance, you’ll benefit from almost immediate finance. Using a very quick application process using your card receipts, you could receive the sum in a matter of days.
Because MCAs are relatively easy to get and fast to process, they can help businesses take advantage of market opportunities. For example, if a company knows sales are going to increase (such as the busy Christmas shopping season) and need to buy stock or improve their premises, they can find the cash to do so while knowing they will be able to pay back the finance. Similarly, if there is an out-of-this-world discount on something you need to buy, it makes sense to buy it on the spot rather than saving up over time.
Would you like to find out more about merchant cash advances? Get in touch with our alternative finance experts.