Merchant Cash Advance Companies has been gaining momentum in recent times as the financing tool of short-term businesses. It is also known as ACH or cash advances. The loan provides easy access to fund for the entrepreneurs who need it.
Even though getting merchant cash advance loan is much easier than securing other type of funding, this ease usually comes with a cost. This kind of financing is pretty expensive.
The expense and the short term nature of this product tend to make it dangerous if not used in the right manner. However, if you are using it in the right condition, it will provide you with several opportunities.
Actually, MCA is a product that enabled you to sell the future credit card sales in return for an immediate payment. Merchant Cash Advance is aimed at the companies and retailers that just had credit card. This product has evolved and is capable of financing almost any kind of future sales revenue.
The cash advance companies tend to claim that MCA is not a loan since money is not being loaned. They claim that they are buying future assets and are subject to the various underwriting rules. Read more further what is merchant cash advance and how it works!
How does It Work?
Cash advance is pretty simple. The Merchant Cash Advance Company will review the company sales and will decide on how much they can give you and how much you will be able to pay back. The payback is usually calculated using the factor which is multiplied against the fund which is provided.
The next primary step is to calculate the payback time. Payback might range from about 3 months to 15 months. If you have longer paybacks, it will have higher factor rates. Nonetheless, the risk is the crucial variable for determining the factor rate.
The combination of the payback and the factor time is going to decide on hoe expensive the solution is going to be for you. If you have a payback for three months, it might be pretty expensive.
How to Repay Merchant Cash Advance?
The manner in which you repay the merchant cash advance loan to the Merchant Cash Advance Company Canada is going to depend on the kind of sales that you are financing.
You have few options. If you finance credit card sales, the MCA is going to be paid simply by splitting the daily revenue with the MCA Company. The rate of payment is known as the retrieval rate which might range from 3% to 15% of the sales.
In case you are financing general sales, the cash advance company will get paid by making a daily debit from the business bank account. Here, the payment amount is fixed. Now that you have learned what is merchant cash advance, find out when is the right time to get one!
When is Getting Cash Advance a Good Idea?
A short cash advance loan will not be a good solution if the company has the company already has cash flow problems. During this time, a revolving product will be a better solution.
A cash advance loan will only be able to solve a problem temporarily. This is simply due to the way in which it has been structured. It might actually leave you worse by using up all your profit. The loss will enable you to get another loan from a Merchant Cash Advance Company Canada. Thus, you will go off on a financing spiral. It is better to look for alternative options. Read more about merchant cash news here!