How Much Can I Borrow with a Merchant Cash Advance?

A merchant cash advance is not a loan but rather an advance based on credit card receipts. Learn more about how much you can borrow with an MCA.

How Much Can I Borrow with a Merchant Cash Advance?

A merchant cash advance is not a loan, but rather a cash advance based on the volume of your credit card receipts. The funder receives the refund by taking a portion of its future credit card sales each day. You can usually get approved in a day or two with very little paperwork, but you're likely to pay for this convenience with higher interest rates. Because this option is more expensive than other options, it's a good way to take advantage of a short-term opportunity that requires quick cash, but can be very costly if you're looking for money to get you out of a financial bind.

You don't want to get used to relying on merchants' cash advances, as their higher cost can make it very difficult to manage future cash flow. There are also some major downsides to merchant cash advances, including the fact that they are usually more expensive than traditional small business loans. Merchant cash advances generally cost 20-50% more than the amount. And unlike traditional APR loans, your daily payments don't decrease the amount of principal that accrues interest; the charge must be paid regardless of how quickly you pay the advance. Merchant cash advances can be a legitimate and useful type of trade financing, but they should be handled with care.

A bad offer from MCA has the potential to drive a company into a debt spiral. If you are considering getting a merchant cash advance, it's important to gather 3 months of bank statements and other records. For faster approval, give the funder secure access to your bank account's transactional data. A funding advisor will contact you within 1 hour (during normal business hours) to complete your application and discuss their funding options. Once you and your funding advisor determine which financing option works for your company, your funds can be approved and deposited within 24 hours. Getting a merchant cash advance is quick and easy, and submitting an application can take very little time.

However, it's important to understand the drawbacks of this type of financing before taking out a loan. The Federal Trade Commission provides details on cash advances and what you should be aware of. A business cash advance is an option for start-ups that don't yet qualify for other types of business financing. In the MCA contract, this is the agreed amount that the lender will give you as a cash advance from the merchant. The terms of the merchant's cash advance are such that John will refund the advance with 10% of his daily credit card sales, and the MCA provider estimates that this will take about 12 months. Merchant cash advance loans and traditional loans have some major differences.

The Kabbage blog highlights some of these differences. Yes, you may be able to get a business cash advance with bad credit if your company has a safe cash flow. Because you may need to perform a daily (or weekly) direct debit from your merchant account, you should consider the consistency of your cash flow and whether or not you will have the right cash in your merchant account every day to support the recurring payment. Often, with daily mandatory payments and required credit card payments, merchant cash advances can quickly become a cash flow burden if left unmanaged. Some alternative lenders may approve a merchant cash advance without bank statements, but you can expect much higher rates. Merchant cash advances are financed much faster than other forms of financing, making them a lifeline for businesses that need quick access to finance.

In that sense, a cash advance from a merchant actually buys a percentage of that company's future income rather than lending the money directly. Business owners receive advance financing from a merchant cash advance provider and pay the advance with a percentage of the company's daily sales. The number and number of credit card transactions are more important than a company's credit profile, with less emphasis on personal and business credit information. Strong sales numbers can help a company with bad credit qualify for a business cash advance.

Christi Costell
Christi Costell

Wannabe internet ninja. Proud problem solver. Amateur zombie fanatic. Subtly charming bacon geek. Certified food trailblazer.

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