Pro: You get your money quickly. Banks make you wait several weeks for approval on a loan. With a merchant cash advance, all the lender has to look at is your bank statements and your credit card income receipts, so you can get approval (and funding) within a few business days.
Pro: Your payments aren’t fixed. You don’t face a monthly minimum payment on this sort of loan. Instead, you pay a percentage of your credit and debit card sales each day. That means that you don’t have a big check to write, whether you have the funds or not. Instead, when you have a strong sales day, you make a larger payment. When you have a slow day, you still get the same percentage of your sales that you would have on the big day.
Advantages of an MCA
Your personal assets don’t go in as collateral. This is an unsecured loan, and if your business goes down the tubes, you won’t be personally liable for the balance due.
You don’t have a set weekly, monthly or quarterly payment. So if you have a down cycle in your business, you pay less back, and you don’t have to pay any fees as a result either.
Fast Funding. Approval takes a business day or two in most cases, and your advance gets funded within a week. You don’t have to send in a ton of documentation, and you don’t have a stack of papers to sign. The provider will check your incoming credit card receipts to ensure that you’ve been getting what you say you have, and you’ll have to give them some bank statements as well to show the financial health of your company.
Bottom line? If you have a strategic plan to put a merchant cash advance to work for you, it can be the boost of cash that could be a huge advantage for your business. After all, if you move into that new space and business doubles, will you really begrudge those payments you had to make? Absolutely not. If you think Merchant Cash might be a big advantage for your own business, give Amansad Financial a call today.
Con: Your APR could be high. Once you roll in all the fees and interest, you could be looking at an APR between 30% and 300%, depending on the lender, how much money you are taking out, the amount of time they plan for you to repay, and depending on your own risk factors (amount of time open as a business, for example). Business credit cards (12.9 – 29.9% APR) and online small business loans (7% – 108% APR) are often available for less.
Con: There is rarely no benefit to early prepayment. When you sign the agreement, your repayment amount (which includes interest) is set. This is different from a loan that allows you to pay extra principal with each fixed payment when things are flush.