Here Is Everything You Need to Know About Merchant Cash Advance

Cash flow fluency is one of the major requirements of running a business without any interruption. If you are a merchant, contacts with wholesalers and direct manufacturers decide the future of your business. In order to maintain the balance of demand and supply, you have to consider the option of merchant cash advance. This is a kind of financing meant for keeping the supply uninterrupted. A lump sum amount is paid in advance to the supplier through credit or debit card transactions. The short-term cash crunch is a common issue among medium and small businesses. In that case, a business cash advance (MCA) helps in maintaining the supply. Let's understand how it works in detail. 

Understanding the working of merchant cash advance

First of all, you have to know the basic requirements to become eligible for MCA service. It requires some important documents including:-

  • Your bank and credit card statement

  • Identity proof issued by the state authorities

  • Business tax returns reports

Before opting for this option of payment, you need to understand that price for MCA is not fixed. No annual percentage of interest rate is decided. Therefore, you have to pay a much higher interest rate as compared to other loans. However, businesses still go with this option because the process of getting a merchant cash advance is faster than others. Instead of weeks, it just takes a few business days to receive lump-sum payments after applying. It is advisable to maintain a good credit score because lenders usually check your personal credit for credibility satisfaction. The merchant cash advance loans have some pros and cons that we are going to explain below. 

Pro

  • Easy to apply and quick processing

  • Adequate flexibility for the convenience of your business

  • No collateral required

Cons

  • Higher rate of interest as compared to other business loans. 

  • Merchant processors may need a change in some cases

  • Problems with potential cash flow

In order to facilitate the borrowers of the merchant cash advance, some online calculators are available. These calculators are helpful in figuring out the actual cost so that you can make a quick decision. Just mention a few details such as:-

  • The amount that you require as merchant cash advance

  • Option of payment that can be e monthly credit/debit card sales or fixed daily payment

  • Choose the payback terms between factor rate and total payback amount

  • Factor rate

  • Estimated monthly credit/debit card sales

  • Monthly credit/debit card sales percentage.

In order to apply for merchant cash advance loans, you just have to fill an online form including information such as:-

  • Occupation type

  • Required amount

  • Annual turnover

  • Residence type

  • Total years in the current occupation

  • City from where you are operating

  • Contact number

The merchant cash advance loans are good for small and medium-sized businesses. They help in overcoming the issue of cash crunch but you have to be aware of the final payment. Use a reliable calculator to make sure that the interest rate including the total amount is not affecting your profit margin.