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What is the Difference Between a MCA and a Term Loan?
Unlike a loan, we provide your business with capital by purchasing a percentage of your future credit card sales and debit card sales. Daily remittances are an agreed-upon percentage of your sales that are automatically deducted by credit card processing or from your bank account. Cash advances are a perfect solution for seasonal businesses or ones with fluctuating revenue because they ensure that your remittances are based on what you can afford.
How Does a Small Business Cash Advance Work?
MCAs are fundamentally different from small business loans, so the process of receiving funds and fulfilling your obligation is also different.
How To Get a Merchant Cash Advance
Merchant Advance Details**
Once we figure out the funding that’s best for you, we’ll let you know the cost** for each option. For your ease and convenience, we present merchant cash advance pricing as a factor rate: Factor Rate = Purchased Amount ÷ Advanced Amount
Merchant Cash Advance: Advantages and Disadvantages
While merchant cash advances can be great business funding for seasonal businesses or those looking for short term loan options, other financing products may be better-suited for certain initiatives.
Fast, Simple Business Financing
With an online application, application review within one business day and funding delivered straight to your bank account, the Credibly experience is designed to be intuitive for business owners.
The Right Loan for YOUR Business
We design customized capital solutions to ensure your business gets the right funding type and amount for your business needs and goals.
Best-in-Class Customer Service
Credibly business experts are standing by to help you, from the first time you submit an application until you pay off your final business loan with Credibly.
Effortless Automatic Payments
Payments are automatically remitted from your bank account, so you can focus on running your business.
Is a Merchant Cash Advance a Loan?
Technically, a merchant cash advance is not a loan. With a merchant cash advance, a business owner sells a portion of their future credit and debit card sales for money they can use right away. The provider of the advance then collects a percentage of the business’s daily credit card sales until the amount of the advance, plus the factor rate, has been collected.
The percentage that is collected from the credit/debit card transactions is known as “holdback.” The business owner and the advance provider will also agree on a factor rate, or the amount the merchant satisfies in addition to the amount they were advanced.
Are merchant cash advances legal?
Merchant cash advances are not traditional loans – they are purchases of future payment receivables for an upfront, discounted purchase price. Because they are true sales and do not come from a traditional bank, there is no fixed payment or term, principal, interest, or interest rate involved and state usury and/or lending laws do not apply.
Do merchant cash advances hurt your credit score?
A merchant cash advance will not directly hurt your credit score or give you bad credit, but it could indirectly lower your score by raising your outstanding balance and your credit utilization ratio.
How much does a merchant cash advance cost?
Cash advances are priced as a total cost of capital with fees and factor rates included. Factor rates are typically based on the risk associated with funding your business.
Unlike many business loans, merchant cash advances do not require the business owner to provide any additional assets as collateral. This can be beneficial for smaller businesses who might not have major assets like real estate or vehicles to serve as collateral.
Is there a financial benefit to paying off a merchant cash advance early?
There is no financial benefit to repayment of a merchant cash advance early. Since you agree to pay a set percentage every day, you don’t have the benefit of paying less interest over time like you would with a traditional business loan.
What can you use a merchant cash advance for?
Funds from merchant cash advances can be used for many different purposes, but since it is a type of short-term funding, an MCA is best used for covering temporary cash flow shortfalls. Business owners often use merchant cash advances for things like buying inventory, paying employees, making emergency repairs, marketing expenses, purchasing equipment and other short-term expansion projects.
How do you apply for a merchant cash advance?
Applying for a merchant cash advance is a much simpler process than applying for a regular business loan or working capital. You’ll be asked to provide some basic information and documentation about your business, such as:
- Past bank and credit card statements
- A copy of your business lease
- Your business tax ID number
- Your personal social security number
- A copy of your driver’s license or another type of government-issued photo ID
- A copy of your business tax returns
Although merchant cash advances are often attainable for businesses with credit scores that prevent them from getting traditional business loans, that doesn’t mean your credit score isn’t a factor at all. Each merchant cash advance provider has different criteria they look for, but they generally do check your credit score before approving an application.
Applications for merchant cash advances are approved very quickly and once approved, business owners receive their funds within a matter of days. To learn how much you qualify for, fill out our online prequalification request. Submitting is free and easy and will not negatively impact your credit score.