A merchant cash advance, or MCA, is a form of alternative business funding used by businesses to meet their financial and operational needs. Here are the key features of an MCA:
- Short term solution: It is a short-term financing option. It is not a loan and is not covered by the same rules and regulations as other types of financing
- Flexibility: It provides flexibility with variable payments based on business receivables. It is a simple and has a much easier application process compared to traditional loans
- Based on sales estimates: Repayment of the cash advance is generally based on historical credit card or debit card sales, and future credit card/debit card receivables
- Lumpsum amount: It provides a lump sum amount of cash based on an anticipated amount of credit card/debit card sales from the business operations
- Improve cashflow: It is designed to accelerate the business owner’s cash flow, allowing the capacity to take quick advantage of upcoming growth opportunities
- Most suited for: Businesses who accept credit card payments and are in need of quick capital are ideal candidates. It is ideal for businesses with high credit card sales, revenue receivables, or that are seasonal.
- No collateral: No collateral is required
In summary, a merchant cash advance provides a flexible and fast way for businesses to get access to capital based on their anticipated credit/debit card sales.