IS MCA A DREAM COME TRUE FOR SMALL BUSINESS OWNERS?
Is MCA A Dream Come True For Small Business Owners?
Lu thought of launching a new product line for her company ‘Au Naturale.’ The body creams and moisturisers had done fairly well, but now she wanted to introduce a whole new range of body oils and bath essentials too.
The only problem was she needed the money fast without having to go through the tedious process of getting her loan approved by the bank and she was almost certain that her new products will be an instant hit and generate sufficient revenue, as her moisturisers and body creams previously did.
After exploring all the options, she decided to apply for a Merchant Cash Advance. Her application was approved within two days, which meant that she could launch her products the following day. As expected, her products were a big hit, she was able to grow and expand her company with the help of MCA.
What is MCA?
For small businesses obtaining a loan from the bank can be a rather tedious and long procedure as banks typically consider small businesses as being too risky, which can cause a lot of inconvenience for the owners who require immediate cash to either expand their company or to keep things running smoothly.
In such cases, MCA plays a pivotal role in providing such small-scale businesses with either a lump-sum amount in exchange for a specified percentage of their future debit and credit card sales, plus a fee.
Moreover, it is a good option particularly for small businesses, as it does not have strict eligibility criterion, thus they don’t face any difficulty in qualifying. Secondly, since the revenue of small-scale businesses such as retail or departmental stores is primarily generated through credit and debit card sales then MCA can be used as a short-term financing tool; they are spanned from 3-15 months.
Thus, MCA is great for funding a short-term need as it can facilitate and sustain cash flow, help pay off debts, and in maintaining the general expansion and growth of your business.
How To Apply?
Applying for an MCA is a comparatively easy and efficient process. MCA providers will look at your credit card processing statements to assess if sufficient revenue is being generated. Some might also require your credit score and bank statements.
However, unlike bank loans that require a good credit score, MCA has no such condition. Which means that a company with a bad credit card score is still eligible to apply. Furthermore, the application process is almost always online and is approved the same day you apply.
In addition to your credit card processing statements and credit score, a Merchant Cash Advance Provider will acquire your driver’s license, voided business check, bank statements and business tax returns.
How does MCA work?
Unlike bank loans that require one fixed payment every month over a fixed repayment period, with MCA daily or weekly payments are made, along with an additional fee, until the advance is completely paid.
All of this depends on the company’s ability to repay the MCA. Moreover, the MCA provider determines a factor rate that normally ranges from 1.2-1.5, after calculating and assessing the risks. The number of fees you’ll have to pay depends on the factor rate, so the higher the factor rate the higher the fees you pay and vice versa. In order to figure out the repayment amount, you simply multiply the cash advance by the factor rate.
To sum it up, MCA is a great option for small businesses, as in addition to providing fast capital, it also enables the business to grow and expand in a much more efficient and hassle-free manner.
