Merchant Cash Advances
MCA Funding
What is a Merchant Cash Advance (MCA)?
Merchant Cash Advances or MCA's is an advance of a lump sum of money to a company in exchange for a fixed greater amount (purchased amount) than the specified amount (purchase price).
The repayment process for a Merchant Cash Advance hinges on the holdback percentage.
This ensures that the repayment rate is proportional to the business's sales volumes, hence offering a harmonious relationship between cash flow and debt servicing.
This repayment model provides a measure of financial breathing space, particularly during slower business periods.
Very Flexible Terms
The convenience and flexibility of an MCA comes with higher financing fees compared to options such as working capital loans, which often feature competitive interest rates and flexible repayment terms. At the heart of MCA costs is the factor rate—a fixed cost applied to the cash advance—potentially leading to higher overall financing costs. However, for businesses that value rapid access to capital and the absence of fixed monthly payments, an MCA can be an attractive form of short-term financing
Credit Score Tolerances
A merchant cash advance, even a fair credit merchant cash advance is not like traditional bank loan. It is correct that merchant cash advances have no personal guarantee to the business owner, but rather a business owner’s performance guarantee. This product is a fast-funding method for a company that needs money fast to support cash flow.
Merchant Cash Advance Rates
10% up to 1.45% Factor Rate (This is not an interest rate/APR like bank loans or other traditional small business loans)
MCA Repayment Terms
No term limits. Estimated payback periods are 6 to 18 months, tailored to accommodate the sometimes-volatile cash flow of retail businesses and other inventory-dependent companies.
MCA Fees
Typically 1% to 3% Origination Fees, which is relatively minimal considering the speed and flexibility of the lending process.