Merchant Cash Advance: How Does It Work

Did you know that there is a type of loan that can provide you quick or instant cash for businesses? This type of cash advance is similar to a paycheck advance, except that this type of cash advance is only for business purposes rather than personal or individual purposes.

This type of loan is called, Merchant Cash Advance which is also commonly known as MCA. This is a form of financing that will allow merchants to sell a portion of its future sales in exchange for immediate or instant payment. Moreover, this type of advance or financing will provide any company with funds to pay their operational expenses and to make their company grow. Edgecapital funding is an expert of working capital loan, visit them for more interesting information.

Here how does this type of cash advance works?

  • Most of the merchant cash advance or MCA companies will always consider transactions to be a purchase of a company’s future sales rather than considering it as a loan type of financing. This type of financing will work first on determining how much of a funding is need to provide and that the finance companies will review the company’s credit card sales, bank statements, commercial sales, and other information. With all these given reports or papers, they can provide the sales performance information which will give the financing company an idea of a company’s future sales potential.
  • The MCA works as they determine the funding amount needed. This will be determined through a combination of the company’s sales and the company’s perceived risk of their account. Most of the finance/cash advance institutions advance anywhere from eighty percent (80%) to one hundred fifty percent (150%) of the company’s average monthly revenues that are based on those parameters mentioned.
  • The actual funding part that will be funded in a company is relatively simple because all the funds are deposited directly into the company’s account once the financing is approved.
  • After the funds are transferred to the company’s account, the next due process is on paying back the funds they lend. The merchant can repay the cash advance in a variety of ways. If you are one of the companies that funded credit card sales, then your company can pay the finance company back through a percentage of its daily sales, this means that is a retrieval rate. A retrieval rate can range from eight percent (8%) to thirteen percent (13%) of the company’s daily sales. The payment will be paid back by implementing a split processing with the company’s credit card processor. Another type of way is allowing the cash advance company to deduct funds from the merchant’s bank account via the ACH system which is a direct withdrawal.

This type of loan is considered one of the most top listed ways of having funds for a company.