A Merchant Cash Advance provides businesses with speedy access to funds based on their previous credit and debit card sales. A business can apply for a cash advance with a financing company, and they will receive funds through a quick and easy process. Repayment operates through a daily deduction of future card sales, plus a fee until the total amount of MCA is repaid.

If you are a small business looking to make an investment or purchase and need access to fast cash, then a Merchant Cash Advance could provide a great option for you. Those who receive the majority of their transaction payments by card will especially benefit.

By applying for an MCA, you could see the funds in your account in as little as two days. MCA offers an ideal solution for a business that doesn't have many assets as they are unsecured, so you won't need any collateral. You can request financial help without putting your home or belongings on the line.

Merchant Cash Advance terms will vary depending on influencing factors. However, some typical terms apply:

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  • Maximum advance amounts range from $2.500 to $250,000
• • Repayment terms are based on the total amount of advance you borrowed, with APR applied.
• • Interest rates are typically between 1.14% to 1.18% variable.

You and the MCA provider will agree on a fixed percentage which they will deduct from your credit and debit card sales every month until you have repaid in full. This percentage fluctuates with your sales, so if you are doing better one month you can pay off more of your loan. Repayment periods range from 3 months to one year. Those with higher credit card sales are more likely to repay in a shorter time frame.

A merchant cash advance presents many benefits for your business including:

• Quick access to funds: Once approved, you can expect to see the funds in your account in as little as two days. This process can often take up to one week, which is still much quicker than other lending options.
• Easy application:Applying for an MCA is easier than applying for a business loan and requires less paperwork.
• No credit history needed: As a Merchant Cash Advance doesn't run a credit check, even those with damaged credit can apply. Regarding they can prove to the financing company that they can repay in full by providing credit sales receipts for several months prior.
•Covers a range of business purposes: As long as you have a valid reason for applying for a Merchant Cash Advance for your business, your application is likely to be approved as MCAs cover a wide range of business purposes.

High APR. Depending on all the influencing factors, interest rates can get extremely high, ranging from 40% to 350%. These rates are exceptionally high compared to regular business loans.

No federal regulation. As Merchant Cash Advances are not established as loans, but as transactions, there is no federal supervision. Therefore, they lack protection from government laws and are instead regulated by the Uniform Commercial Code.

Risk of debt. Due to the nature of MCAs and how quickly and easily they process, businesses may rely on these for fast funding. Once they repay their first one, shortly after, they may apply for another which can introduce a vicious debt cycle.

Merchant Cash Advances should only be used as a last resource during a financial crisis within a business. Due to their high APR rates, this type of business loan could end up doing more damage to a budget.

Alternatives to this include small business loans, which you can apply for through banks or online lenders. You can choose from short-term or long-term business loans, depending on your financial circumstances. This option will always run a credit check, however, interest rates are relatively lower so acts as a suitable alternative for Merchant Cash Advances.

*American Express Business Line of Credit Disclosure: All businesses are unique and are subject to approval and review. The required FICO score may be higher based on your relationship with American Express, credit history, and other factors. American Express® Business Line of Credit offers two loan types, installment loans and single repayment loans for eligible borrowers. All loan term types, loan term lengths, and pricing are subject to eligibility requirements, application, and final approval. This chart contains general information about the American Express® Business Line of Credit installment loan type only.
**Biz2Credit Disclosure: See website for details. Varies depending on product and qualifications.