The pros and cons of merchant cash advances for a small business
A merchant cash advance is a hidden gem in the world of small business enterprise. Thinkzero interest, no fixed payment term and a high approval rate. So it’s easy to understand why more and more businesses are opting for merchant cash advances [MCAs] as an alternative means of funding.
But what exactly are MCAs?
And what are the pros and cons for business owners looking for a quick cash fix when facing cash flow difficulties?
MCAs a quick explanation
Merchant or business cash advances are advance payments made to a business in exchange for an agreed percentage of future sales through credit or debit cards.
More suited to businesses that take a reasonable proportion of their income through credit or debit cards, a merchant or business cash advance is considered a short term, unsecured business loan based on future sales.
In agreeing to a merchant or business cash advance, a business effectively sells a proportion of their future sales or income in order to receive a large cash sum to aid increased cashflow.
So, what are the benefits?
Compared to conventional business bank loans, merchant cash advances come with a host of benefits to businesses in need of additional cash:
High approval rate: Merchant cash advances have a typically high approval rate when compared to traditional bank loans, meaning younger businesses who often struggle with cash flow are more likely to benefit as a result.
Speedy cash injection: Once a loan has been approved, merchant cash advances have a quick turnaround, where businesses are normally in receipt of their requested cash injection within 24 hours.
No interest rates or APR: Compared to conventional bank loans or other means of business funding, merchant cash advances have zero interest rates, providing a more manageable loan option for both small businesses and start-ups.
Michael Foote is the founder of Quote Goat, a money-saving site for personal and business customers, offering leading comparison solutions in finance, energy, and insurance. Michael has over 13 years? experience working in the finance, insurance and currency sectors and is a self-taught expert in all things SEO.