4 Benefits of a Merchant Cash Advance for Small Businesses

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Category: Loans
Posted on: 01/21/2021
swiping a credit card at a retail store

merchant cash advance (MCA) is a type of business financing that benefits a small business owner in many ways. It is specifically designed to be widely accessible, seamless, and convenient. The biggest benefit of an MCA is that it works with the ebbs and flows of your business. The loan repayment method is on a daily basis, allowing you to make small, "bite-sized" payments rather than large lump sums. It is easier to get approved for since it isn't solely based on your personal credit score, and it bears a lower borrowing risk. It has an insignificant impact on your operating costs since a percentage of your daily plastic (debit/credit card) sales go towards the repayment of your outstanding balance. Lastly, you can complete the entire process of getting upfront capital without upfront collateral in as little as two business days.

Pay back in small amounts, and only when you get paid

The merchant cash advance is on a daily repayment basis. Sounds scary? It's not. The repayment is a small percentage of your daily sales that is deducted from your batch out. Since it is a percentage, you pay a low amount on the days that you have low sales. Also, since the repayment method is on a daily repayment plan, the amounts are bound to be smaller than monthly payments. 

Doesn't negatively affect your credit score

A merchant cash advance doesn't show up on your personal and commercial credit report as a line of credit. This is because a merchant cash advance is a cash transaction, not a credit-based loan. Also, it does not contribute towards your credit utilization. It can also be used to pay off your current credit loans to bring down your credit utilization, which increases your credit score. 

Requires no upfront collateral – a low-risk financing option

The merchant cash advance provides you with quick upfront capital without the risks associated with it. There is no upfront collateral required, making it a safer option than collateral-based loans. MCAs do not solely rely on your credit score for approvals, so business owners with less-than-stellar credit can still be approved.

Easy application and quick financing

The application for a merchant cash advance is usually a quick and painless process for small business owners. You can simply apply online in under 10 minutes. The three pieces of documentation you need are:

  1. Business Bank Statements
  2. Voided Check
  3. Government Issued ID

Once you have completed the application, expect a verification call within 30 minutes. If everything goes well, you can have your upfront capital in as little as two business days. 

Making the best decisions for your small business is never easy. But with the right advice and a little help from Finance Guru, you'll be better informed to make the right choice. 

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Finance Guru