At the most unexpected times for the majority of businesses, there emerges an acute need for a range of new expenses which can pop up at any time; and when they do, the capability of getting fast business loans via a trustworthy source is a decisive factor for businesses. In the recent years, a good number of businesses have taken up business loans more than conventional bank loans because of the convenience that many alternative lenders provide customers.
There is a wide range of loan options for small business proprietors. However, amongst others, Merchant Cash Advance or MCA is the best bet for small business owners since it comes with its own perks.
In such dire situations and acute needs for an immediate lending source, the preference and popularity for merchant cash advance has only increased among the range of other small business loan options. Traditional banks, which were all the rage among old-time lenders, have certainly lost the advantages that they had easily enjoyed erstwhile with the small businesses. New fast business loans are more reliable and flexible for businesses having immediate needs.
What is Merchant Cash Advance?
Prior to 2007, traditional banks were virtually the only option for small business owners for getting fast business loans. Particularly, since the recession of 2008, commercial banks have started asking for a lot of information and documentation to apply for a bank loan. There is no more paperwork than ever, which ultimately increases the processing time of bank loans. Thereby, getting fast business loans at that time was quite a long and cumbersome procedure.
The grounds for why MCA is not deemed as a financial loan is that the merchant cash advance lender buys up the future credit sales of the applicant and presents with fast business loans in exchange for it. As soon as a small business owner decides to apply for a merchant cash advance for their particular business, the MCA provider sets a fixed percentage, which will be taken out from their credit and debit sales on a daily, weekly, or monthly system.
This agreed-upon percentage will be deducted till the entire sum that the business originally borrowed gets paid in full within the assigned time period. On an average, the merchant cash advance needs to be paid back in full within one or two years at the max.
Why is merchant cash advance the best source for getting fast business loans?
Merchant cash advances are deemed as an expensive fast business loans alternative. It is mostly brought into play by the seasonal businesses or employed as a final resort for those firms that cannot get funding from anywhere else or that do not hold a good credit.
Most importantly, MCA is the most viable option for fast business loans. All thanks goes to its extremely fast process of approval, which on an average takes between two to five days at the most. As soon as the application gets approved, the providers of merchant cash advance charge a factor rate and take out a given percentage of the credit card receipts on a daily basis of a given business. This is identified as the “holdback percentage.”
Distinct from other funding loan sources, a merchant cash advance loan is a form of cash advance, exactly like its name implies. This form of finance makes businesses available with a figure of cash in exchange for their future receipts and credit card sales. More often, MCA providers do not consider themselves as financial lenders. The merchant cash advance system consents to a business to put up only a tiny segment of the business for sale so as to get a lump sum cash to rally their expenses on a day to day basis.
Who is most suitable to apply for a Merchant Cash Advance?
There is a wide range of businesses today, however not all of them should go for an MCA. Rather, merchant cash advances are made use of by some distinct types of business firms. The businesses that can take advantage of merchant cash advance include:
- For those small business owners who cannot get any other short-term form of financing.
- For those who could require a type of fast business loans, relative to the usual working capital lending options.
- For those who do not meet the prerequisites of a more rigorous loan option, such as SBA express loans.
The needed criterion for small business owners to apply for Merchant Cash Advance is listed below:
Merchant cash advances are issued by private financial firms and not banks. They are a great and viable option for fast business loans where proprietors can get the accorded payment within a short period of two to five days. Any sort of business group can apply for it provided that they meet the set required qualifications of MCA.
Merchant cash advances are made use of by small business owners to cover any, some, or all of the following needs:
- Working Capital
- Short-Term Needs for Financing
- Cash Flow
While MCA is an easy option for getting fast business loans, before issuing a merchant cash advance, the appliers should fulfill the following qualifications:
- More than two years of accepting payments on their business credit or debit card
- More than $50,000 annual credit card sales
- A viable credit card processor that should be in partnership with the provider of merchant cash advance the firm is seeking
These above-mentioned criteria are extremely necessary to fulfill before applying for any fast business loans. This is for the reason that the provider of merchant cash advance has to evaluate the accompanying risks and levy the credit criteria of a small business and its proprietors. The providers of MCA characteristically look at the day to day receivables or credit card receipts of a firm to assess if the firm will be able to pay back the set advance in a timely manner.
The providers of merchant cash advance usually prefer to witness a target amount of dollars, which a business makes in its credit card transactions every month before issuing a merchant cash advance. The literal target varies according to different MCA providers and is distinctive to the sum that a firm borrows. Conversely, all providers of merchant cash advance have to ensure that they are paid back in a timely manner, classically within 1 to 2 years.
The process of MCA application
A straightforward rationale with regard to the increasing popularity of the merchant cash advance system is by reason of their simplified process of application. Nothing like the tedious traditional financial lenders who make small businesses go through a well-known long and difficult application process; fast business loans hold an elaborate and petite process, wherein an entrepreneur needs to make only the following things available during the application process of merchant cash advance:
- An accounted copy of the small business owner’s recent credit or debit card sales.
- A copy of the financial statement of the given firm.
- A copy of the firm’s estimated sales in the near future.
Subsequent to undergoing this easy course, the loan processing and approval will only take a few hours at least or within a matter of days. A number of fast business loans tend to get dispersed in a single day. The prerequisites for the application route of the merchant cash advance system are easily attainable and reasonable. This application for fast business loans also does not inquire any type of collateral.
In present, a number of application procedures have started to come online, wherein any small business proprietor can avail for fast business loans like MCA from any given location. The applier just needs to have a stable access to the Internet in order to apply for a merchant cash advance from the comfort of their home, office, or anywhere else for that matter.
Bear in mind, that there are lesser federal regulations around merchant cash advances. Within this extremely viable process, you may come across a number of predatory lending means as well. It is, hence, vital to check the reputation and trustworthiness of any provider of merchant cash advance.
On the other hand, the system of merchant cash advance is still to your advantage if your small business happens to need a viable and quick funding source in order to cater to all needs of short-term financing and working capital necessities.
More often than not, fast business loans are required by any given business at some point in time. Such a need for immediate loans can cover payrolls, inventories, expansion of marketing shots, and even for day to day financial requirements of small businesses. In such cases, the provider of merchant cash advance can come as a blessing since they can offer the immediate funding relief with minimum hindrances.
Merchant Cash Advance comes with a lot of benefits as mentioned above. For instance, it has high approval rates, quick and easy application process, and minimal eligibility requires. Thus, MCA is the best option for businesses to fulfill their short-term lending requirements.