Are you also in need of advance cash to help you keep your business operational? Then you may have heard the term merchant cash advance or MCA.
A merchant cash advance (MCA) could provide short-term financial support if your company accepts credit or debit card payments for its products but experiences a decline in sales. Applications are typically approved if you have sufficient sales experience to demonstrate your ability to repay. MCAs, however, are exempt from lending regulations because they aren’t commercial loans, so they can charge high borrowing costs.
Continue reading the article to learn more about merchant cash advance meaning, its working, benefits and merchant cash advance jobs in detail.
What is Merchant Cash Advance?
A merchant cash advance is a sort of business finance that provides a lump sum payment depending on future credit or debit card purchases. You are essentially guaranteeing the advance through future revenue. This sort of financing is normally reserved for enterprises that generate revenue through credit card sales.
However, the advance is not technically a business loan, and MCAs do not record your payment history to credit bureaus. As a result, this type of financing will not help you create credit. MCA eligibility standards are flexible, making it easier for businesses with negative credit to get authorized.
How does a Merchant Cash Advance work?
With a merchant cash advance loan, payment is made to your company in advance against credit or debit card purchases in the future. It’s usually used to fill cash flow shortages and give businesses more working capital. This is how the merchant cash advance functions:
- Your business receives the amount of cash from the financing company for your business needs. The agreed amount of funds is deposited in your business bank account.
- For this money, the financing business charges fees. MCAs usually impose a factor rate, which is multiplied by the total loan amount, instead of an interest rate. For instance, the total cost of a $100,000 loan at a factor rate of 1.4 would be $140,000.
- Future sales determine how much your company repays. Most MCAs need daily repayments, but some can provide weekly payments. Once the borrowed amount, the factor rate, and any other fees are paid, the advance is repaid.
Merchant Cash Advance Example
If you want to understand it practically then here is the merchant cash advance example to help you understand this better:
Let Cash advance amount: £10,000
Then Amount repayable will be: £12,500
At Monthly repayment percentage: 20%
In this instance, the lender proposes to purchase £12,500 in future sales for £10,000 with a 20% payback rate. The business is given £10,000 and will eventually have to repay £12,500. Repayments for a company cash advance come out of your earnings. The 20% figure is the percentage of your income that will go toward repaying the £12,500 loan, not interest.
Benefits of a Merchant Cash Advance
Here are some of the key benefits of merchant cash advance system as mentioned below:
Flexibility: Repayments are based on sales and are only made when your company accepts credit card payments from customers.
Speed: Depending on the lender and the application procedure, you may receive a 24-hour approval for a merchant cash advance.
Unsecured: You don’t have to use your company’s assets as collateral for merchant cash advances, so it is a sort of unsecured business financing.
Easy Application: Merchant cash advance lenders do not require a business plan when applying for a conventional loan, whereas traditional lenders may.
Risk: Repayments are automatically deducted from the money you receive from card payments, so there is less possibility of ‘defaulting’ on your loan.
Transparency: The total amount you pay back does not alter; the lender will inform you of the complete cost when you take out the cash loan.
Merchant Cash Advance Blursoft
If you are looking for MCA companies then you may have come across merchant cash advance Blursoft. Blursoft is a US-based company that provides financial solutions and services. The company helps individuals to grow their business at low and competitive rates. They have a wide selection of lending products for business owners with bad credit or no credit rating which they can choose as per their need.
Blursoft offers the following services as mentioned below:
- Blursoft provides MCA to businesses that need funds but do not have access to other conventional forms of credit.
- Contractors with no credit can get MCA from Blursoft to get the funds they need for a successful launch of their business.
- It also provides MCA to start-up businesses.
- It provides MCA to Uber drivers with bad credit or no credit to pay for car maintenance or repairs.
- It offers short-term business loans in cash-flow emergencies or other urgent needs.
- It also offers equipment financing to update their existing equipment or purchase new equipment to grow their business.
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Merchant Cash Advance Companies in India
Companies that offer merchant cash advances give money to businesses directly from the credit card processor that processes and settles payments in exchange for a portion of the companies’ daily credit card profits. The following are some choices for merchant cash advance companies in India as mentioned below:
Banks: Many Indian banks, such as Axis Bank and Suryoday Small Finance Bank in association with Paytm, provide merchant cash advance services. When compared to other lenders, these programs could offer quicker access to funds with possibly reduced fees.
NBFCs (Non-Banking Financial Companies): In India, a lot of NBFCs provide merchant cash advances. An NBFC that provides this kind of funding is Bajaj Finserv. However, it’s important to evaluate the conditions and rates offered by different NBFCs to identify the best deal.
Online Lenders: Several online lenders focus on giving companies merchant cash advances. Compared to regular banks, these lenders can frequently provide a quicker application procedure. However, it is advised to be careful as online lenders might charge higher interest rates or fees.
FAQs
Is a merchant cash advance a loan?
Ans. Yes, a merchant cash advance is a short-term loan used to cover immediate cash needs against daily or future debit or credit card transactions.
What happens if a merchant cash advance is not repaid?
Ans. If a borrower fails on a merchant cash advance then the lender may suspend releasing funds in the future, raise the interest rate, or impose penalties. Even worse, lenders have the option to disclose it to a credit agency, which will lower the borrower’s credit score.
How to get a merchant cash advance loan?
Ans. Applicants can visit the closest retail location that offers merchant cash advance loans. But make sure to discuss the interest rate as per their desired loan amount or business requirements.
Conclusion
A merchant cash advance is ideal for small businesses that require additional funding to improve their overall functionality and competitiveness. As not every small business can obtain bank loans, MCA can get you the money you need for your business quickly. However, the payback amount for a merchant cash advance includes a consideration, so if sales are down, a bigger payback amount can be more detrimental overall. We hope you found this article informative on Merchant Cash Advance and now you can easily apply for one considering the repayment percentage.