Exploring the Basics of a Merchant Cash Advance


A merchant cash advance is a way to help secure funding for a small business. You might also hear it being called credit card receivable funding. If you accept credit cards for payments, this is a method that you might be able to utilize. Learning more about it and finding reputable cash advance lenders are important to get started with taking advantage of this cash advance option.

Learning How This Option Works

The first step is learning more about how a merchant cash advance works. You will create an agreement between your business and a reputable MCA provider. This will detail important information, such as the amount being advanced, the holdback percentage and the payback amount. Remember that this is not a loan in the traditional sense, but it is important that any payback agreement is fulfilled. After making your agreement, the advance is delivered to the bank account for your business. You agree to give the lender an agreed upon percentage of your future credit card receipts or receivables as payment for the advance.

Each day, cash advance lenders will hold back the credit card receipts or receivables at the percentage you both agreed to. This is what the holdback is. Until you fulfill your advance, this will happen. This tends to make paying back the advance relatively fast and the impact is often less noticeable to businesses, making it a more convenient option. For example, if you have a slowdown in revenue, the percentage stays the same, so you are still making payments without the worry of coming up with a lump sum monthly payment each month like you would for a loan.

Loan Cost and Repayment Information

Of course, all lenders will be different, so this is general information. On average, the payback percentage is 20 to 40 percent. You will work with the lender to determine a percentage that works for you both. The amount borrowed will have an impact, with higher advances often requiring a higher percentage. The size of your monthly receivables and the estimated time to repay also impact the percentage.

 Exploring the Application Process

In most cases, the longest it takes is a few days to go through the process, but in some cases, it only takes a few hours. It is not an extensive or complicated process like you would experience with a traditional loan. You start by applying for the advance. You will need your general business information, such as business tax ID and your social security number. Next, you will give the lender all necessary documentation, such as payment processing data, credit card payment information and bank statements. You will also complete an application which is generally two pages at most. Then, you wait for your approval, set up the payback details, finalize your agreement and get your funds into your bank account.

If you want to avoid loans, you can see that a merchant cash advance is a viable option. They key is better understanding this option and what it can do for your business. Once you are ready to get started, you want to find reputable cash advance lenders, such as https://www.nationalbusinesscapital.com/business-cash-advance/ so that you can rest assured that using this option goes as smoothly as it can.