Merchant cash advance is one of the fastest and easiest options for business funding. Technically, it’s not a loan: it’s an advance of cash in return for a percentage of a business’s future sales and a fee.
This is why approval is revenue-based, not credit-based.
While it’s possible to be funded in 24 hours or even the same day, rates for merchant cash advances tend to be higher than for other forms of business funding.
MCA is well-suited to solve for urgent problems or opportunities such as:
- An unexpected revenue hit that leaves a business unable to meet payroll
- A unique investment opportunity with a short time window
- Delayed payment from a customer
- Buying holiday inventory in bulk at a large discount
- Providing bridge capital until an SBA loan is received
With traditional funding from a bank, it may take 6 weeks or longer to get approved or to be declined. Merchant cash advance (MCA) funding is designed specifically for small businesses who need fast funding.
Revenue: The business must have been generating revenue for at least 4 months, preferably 1-2 years. There is no minimum revenue requirement
Advance amounts: Most merchant cash advances are for $10,000 or more. There is almost no limit on the amount that can be advanced. The maximum amount available will typically be within 70%-120% of the business’s monthly revenue. Advance amounts below $10,000 are commonly referred to as “microfinance” deals.
Credit: There is no credit requirement, as long as the business has good (and regular) revenue.
Rates and Terms
- Payments are made either daily, weekly, or bi-weekly
Rates are given as a factor, not a percentage. The factor is multiplied by the total advance amount and divided by the payment length.
Example: a $30,000 MCA with a factor rate of 1.25 and a 4-month term (120 days)
Daily repayment would be calculated this way:
$30,000 x 1.25 = $37,500 (payoff amount)
$37,500 ÷ 120 days = daily payment of $312.50
- 4 months of business bank statements
- 1-page application form filled out and signed