A Comprehensive Guide to the Pros and Cons of a Merchant Cash Advance

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As you operate your business, you’ve been running into some cash flow problems. And you wonder if there’s a solution to this problem outside of turning to a bank for a loan.

The reality is, every business owner experiences periods when their sales are low. Fortunately, when your money happens to be tight, you can experience a little financial relief with the help of merchant cash advance.

A merchant cash advance, also known as MCA, enables you to borrow against your future revenue. In other words, a lender will “advance” you a certain amount of money before you’re paid it.

The question is, is this solution too risky?

Here’s a rundown on the pros and cons of the merchant cash advance financial option. 

Let’s jump in! 

Pro: No Collateral with Merchant Cash Advance

One of the main benefits of using an MCA is that putting up collateral isn’t necessary with this financial option. In other words, you don’t have to put up equipment or property to secure your MCA.

This means that if you’re unable to repay your loan for one reason or another, you don’t have to worry about losing your property as a result.

Pro: Rapid Funding

Yet another reason to turn to an MCA is that it is among the quickest types of financing available for small businesses. 

For the application process, you’ll likely be required to submit bank statements and credit card statements from the past few months. Then, once you receive approval for an MCA, you can expect money to be in your bank account in 24-48 hours.

Con: Daily Deductions and Cost

A major drawback of an MCA is that many lenders will deduct funding from business credit card receipts daily.

This may not be helpful for you if you’re experiencing problems with your cash flow. After all, with an MCA, you’re essentially allowing a lender to eat into your daily revenue.

An MCA also can be very expensive. In fact, it is one of today’s costliest financing options for small businesses. With an MCA, you could face a few-hundred-percent annual percentage rate. 

Con: Not a Long-Term Solution

Finally, an MCA may be more like a bandage versus a long-term solution to your business’s cash flow issues. Fortunately, a consolidation service can help you to free up your cash flow if you’ve taken out too many MCAs.

This service would pay off your MCAs and then roll them into a single payment. This can give you the financial boost you need to keep your company going. 

How We Can Help

In addition to highlighting the pros and cons of merchant cash advance, we offer tips and advice on a wide variety of other financial and business management topics.

For instance, you can find out from our site how best to generate money in today’s Information Age. In addition, you can discover how to develop your own marketing budget.

Take a peek at our site to learn more about how to increase your cash flow and boost your bottom line in the months and years ahead.