Merchant Cash Advance FAQs
What is the maximum that can be advanced under MCAs?
While different providers have different caps, typically MCAs are obtained for between $5,000 and $50,000. They are intended to be a short-term financing source.
What is the average holdback and factoring rate on a merchant cash advance?
This would vary from provider to provider, but holdback rates can be as low as 8% to as high as 30%. Factoring rates range from 1.2x to 1.5x.
Is there any usage restriction for an MCA?
As long as the funds are channelled into the business, they can be used for any business expenses without restriction at the owner’s discretion.
How long do I have to repay a merchant cash advance?
The MCA has no fixed term. It is designed to be repaid as per the volume of business revenues. It’s re-paid as a percentage of daily sales. The repayment amount is different every day.
How can I minimize cash flow problems when obtaining an MCA?
Some simple methods to increase cash flow within the business are to: negotiate longer repayment terms with suppliers, shorten the accounts receivable collection cycles, enforce better inventory control to ensure cash is not tied up in inventory etc.
Can I get a Merchant Cash Advance with Bad Credit?
Yes, you can get a merchant cash advance with bad credit. Merchant cash advances are seen as less risky by brokers. This is because unlike loans with interest payments, merchant cash advance repayments are automated. They are also guaranteed as long as your business continues making money.
Overall, merchant cash advances are one of the easiest financing options to access. Even when you have a low credit score, getting a merchant cash advance won’t be too hard.
What are the alternatives to Merchant Cash Advance?
There are plenty of fast business loans that you can use instead of a merchant cash advance. The most similar option would be invoice factoring. Invoice factoring is also different from traditional loans. Invoice factors are also upfront, although they are not repaid in the same way. Term loans are one of the most popular options.
Can a startup business use MCA?
Yes, merchant cash advances are usually available to startups. The merchant cash advance broker will assess your business and decide whether to give you an advance. If your business is transactional and you accept credit and debit sales, you should have no trouble finding an MCA provider.