Merchant cash advances are more popular than ever for starting or growing your business. The truth is, many businesses today are low on cash. In fact, about 80% of businesses rely on some form of credit. The merchant cash advance industry has changed rapidly with improvements in technology and online lending. But, if you’re new to merchant funding, you may be asking yourself “What are merchant loans?”
If your business does not qualify for a traditional loan due to a short business history or low business credit score, a Merchant Cash Advance (MCA loan) might just be the right solution for you. We’ll go over the merchant funding definition, how it works, and your best options moving forward.
Merchant cash advance loans are a type of merchant funding offered by a loan provider. This type of merchant loan allows you to borrow money against your future profits. It is basically a sales agreement where the merchant (also known as the business owner) sells their future receivables to a merchant cash advance company for immediate working capital. The loan is then repaid with a small percentage of your credit and debit card transactions until it is paid in full.
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Since this revenue is essentially an advance against receivables, the merchant must have a certain amount of sales compared to the loan amounts. Once approved, the merchant can gain access to capital in as little as 24 hours. The loan terms state that you will start repaying the balance as soon as you gain access to the loan. This means there are no set repayment dates, as it depends on the cash flow of your business.
No waiting around for a lengthy approval process - get funded quickly with an MCA loan.
Merchant cash advances have a one-time fixed fee instead of an interest rate. To calculate your merchant funding fee, multiply the factor rate by the amount borrowed. Many merchants notice that these fees are not all that different from the credit card processing fees they’re used to.
Wisco Capital allows businesses to get approved for MCA loans over and over. This means that you can get a small loan now to pay your employees, and multiple loans down the road to fund projects, inventory, invoices and more.
Repayments start immediately upon approval of loan terms and are set to automatically come out of your merchant account. This happens either daily, weekly, or monthly, depending upon the agreement with your merchant funding lender. The top 3 most popular MCA loan repayment structures include:
ACH Withdrawals Automated Clearing House (ACH) withdrawals are the most common way to repay a merchant cash advance. They consist of automatic withdrawals from your merchant account to your merchant funding provider.
Lock Box Withholding The merchant cash advance loan provider will set up a lockbox in your name controlled by their company. You will then have your sales connected to this new bank account instead of your business account. Your lender will deduct their percentage of the sales and send the rest to your business account.
Split Payments Processing Split payments processing is the easiest repayment structure because it automatically deducts from your sales. Every time your business makes a sale, you will receive your portion of the profits, while your provider will receive theirs.
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Merchant Cash AdvanceBar Restaurant
Line of CreditPPE Wholesale
Merchant cash advances may not be the best choice for every business. If you deal mostly in cash, have good credit, want your revenue flow to remain uninterrupted, and want an exact end date for your agreement, you may need to look into other financing options. Short-term loans, invoice factoring, and traditional installment loans may be better for your personal needs and business practices.
However, if you need hassle-free business funding in a flash, a merchant cash advance is your answer. Because of the repayment structure, easy application, and established connection to your merchant services provider, a merchant cash advance is a great tool for new and existing businesses to flourish. Ask your merchant services provider what they can do to help your business grow.
Now is the time for your business to take advantage of a merchant cash advance and let your business reach new heights!
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Apply in as little as 5 minutes and receive an MCA loan within 24 hours or just reach out for more help on what loan type is best for your business.