What exactly is a merchant cash advance?
A merchant cash advance is not exactly a loan, but rather a cash advance depending on the company’s credit card transactions.
A small business can seek an MCA so that advances are paid to their accounts very quickly.
Merchant cash advance lenders exclusively analyze risk or credit quality compared to banks. The MCA provider reviews regular credit card transactions to assess whether a company will refund money in a timely manner. In essence, a small business distributes a percentage of potential credit card transactions to get cash quickly.
MCA fees can be significantly higher than any other type of loan or, depending on the company, they can be very expensive. The company must understand the aspects to make a proper judgment about returns.
What is the merchant cash advance process?
Receiving the cash advance from the merchant is usually a simple procedure. Once the order is accepted, the company can receive the amount in several business days. The paperwork required throughout the filing procedure may include the following:
proof of identification
Reports from banks and credit card companies
Tax returns for companies
The sum a company can earn through the MCA ranges from several hundred dollars to over $100,000. However, make sure that the repayment period will generally be quite short – 1.5 years or shorter in certain situations.
The issuer may regularly collect a portion of the income for loan repayment. Debt payments can be made from linked bank accounts and calculated according to the proceeds collected through debit or credit card transactions. In such a situation, checks or cash transactions do not contribute to a regular goal.
Installments can also be deducted directly from the company’s checking accounts through ACH transfers. Companies with low percentages of debit and credit transactions would also receive MCAs when employing ACH settlements.