Why Businesses Use Merchant Cash Advances for Extra Working Capital
When you’re running a business, maintaining a steady flow of working capital is paramount to ensuring smooth day-to-day operations. Financial hiccups can happen, and when they do, businesses need quick and reliable solutions. This is where Merchant Cash Advances (MCA) come into play.
What is a Merchant Cash Advance?
A Merchant Cash Advance is a type of business financing that involves a lump sum of capital provided upfront by a lender, which is then repaid by the business through a percentage of its daily credit card sales. In essence, it’s an advance on future revenue.
Quick Access to Capital
One of the top reasons businesses turn to MCAs is the speed at which funds can be accessed. Unlike traditional loan processes that may take weeks or even months, MCAs often provide capital within days. This rapid turnaround is crucial for businesses facing immediate financial needs.
No Collateral Required
Unlike conventional loans that often require collateral, MCAs are unsecured. This means that businesses do not need to risk their assets to obtain financing. This feature of MCAs makes them an attractive choice for businesses that may lack substantial assets or are not willing to risk them.
Flexible Repayments
Another advantage of MCAs is the repayment flexibility. Since repayments are based on a percentage of daily credit card sales, they adjust with the business’s revenue. This flexibility can help businesses manage their cash flow, especially during slower sales periods.
High Approval Rates
Businesses that may not qualify for traditional loans due to lack of a strong credit history or other reasons often find MCAs to be a viable alternative. Lenders primarily focus on a business’s daily credit card sales, making MCAs accessible to a wider range of businesses.
While Merchant Cash Advances can be a lifeline for businesses in need of quick capital, like all financial decisions, they should be considered carefully. Businesses need to understand the cost of an MCA, their repayment capacity, and potential impacts on cash flow before taking this path. However, for those businesses in need of a quick, flexible, and relatively easy capital boost, MCAs can be an effective solution. If you need extra working capital for your business, contact Flat Creek Capital Consulting and get a merchant cash advance today.
