Why You Should Get a Merchant Cash Advance for Your Business Funding Needs https://static.wixstatic.com/media/de9385_164ecffd798c4621a60c9219fdfc33c0~mv2.png/v1/fill/w_720,h_378,al_c,lg_1,q_85/de9385

Why You Should Get a Merchant Cash Advance for Your Business Funding Needs

As a small business owner, one of your most critical responsibilities is to secure the funding and financing necessary to pay your bills, buy raw materials and inventory, pay suppliers, pay your employees, and undertake all the activities integral to the functioning of your business.

That is often a serious challenge, especially for relatively young small businesses with limited credit history, limited assets to put up as collateral, and similar hurdles. Yet, without access to small business funding, many small businesses can fail.

Fortunately, there is a type of small business funding available that is easy to obtain, even with bad credit, no available collateral, and other business handicaps: a merchant cash advance.

Merchant cash advances, sometimes called MCA loans or merchant loans, may be exactly what your business needs to provide cash for your operations. They present some unique benefits, and operate in a way that is different than more traditional small business loans, for example.

In this article, we’ll take a look at merchant cash advances, including a discussion of what they are and how they work.

We’ll highlight the key benefits or advantages to choosing merchant business funding, and focus on explaining why MCA loans are best suited for certain kinds of businesses (and maybe a bad idea for others).

In addition, we’ll discuss where you can get a merchant cash advance easily and quickly.

A merchant cash advance is a type of business funding that’s not quite a loan, but has a lot of similarities. Specifically, a merchant cash advance provides an up-front lump sum of cash to your business, which you must repay with interest.

In the case of a merchant cash advance, rather than an interest rate, it’s known as a factor rate, but can be considered as comparable. They are usually unsecured, meaning that no collateral is required in order to get a merchant cash advance.

However, merchant cash advances or MCA loans do differ from traditional business loans, particularly in how the repayment process works.

Unlike a typical loan, where you have a set repayment term and frequency, making equal payments on a particular calendar-based schedule, a merchant cash advance has a dynamic repayment mechanism.

It is repaid via automatic deductions from your credit and debit card sales, and is responsive to your rate of sales. That means you don’t need to hit a certain payment threshold each week/month/quarter, in the way that you do with a traditional loan.

Rather, when sales are slow, your repayments are slow, and when sales are booming, your repayment rate is much faster. This forms the crux of how a merchant cash advance works.

Essentially, unlike a loan, where you are being directly lent funds and repaying them over time in cash or electronic means on a set schedule, instead you are pre-selling a portion of your future credit and debit card sales at a discount to your merchant cash advance lender.

The discount (factor rate) is the “cost” of the service, akin to the interest rate with a traditional loan.

These facts and mechanisms provide a tremendous advantage for certain kinds of businesses, and also feed into some of the unique advantages and benefits of merchant business funding, as we’ll discuss below.

Broadly speaking, the benefits of a merchant cash advance (on its own and in comparison to other small business funding options) fall under one of four distinct categories. These include:

Easy to Qualify with No Collateral Required

Merchant cash advances don’t usually require any collateral to be put up by the borrower. This not only reduces the risk to the business, but makes the entire application and approval process go more quickly.

The net result is it’s easier and faster to get your merchant cash advance funds, allowing you to respond to changes in your business and financial situation within days, not weeks or months as with traditional, secured loans.

Available for Bad Credit or No Credit Businesses

While there is some level of risk to the lender or servicer in terms of a merchant cash advance, and this is reflected in the factor rate being higher than that of a traditional loan, there is a corollary for the borrower – that is, merchant cash advances for business owners are often the easiest type of small business funding to obtain.

Bad credit scores, limited or no credit history, and other traditional hurdles to accessing funding aren’t usually a problem when taking out a merchant cash advance.

They’re often one of the only kinds of small business funding that companies with bad credit or a limited credit history can even qualify for, and therefore have great value for those most in need of small business funding.

Repayment is Based on Sales, Not the Calendar

Perhaps the most important benefit or advantage of a merchant cash advance is the repayment schedule, and how it is based on sales, not the calendar.

This makes it much easier for businesses to repay – there are no looming calendar deadlines or dates by which you need to come up with a set amount of repayment.

Rather, repayment comes directly from sales, and is dynamic based on your rates of sales, so you’re never on the hook for more repayment in a given period of time than your sales can support.

This greatly reduces the risk of default for many small business owners, and is one of the primary motivations that many cite in seeking a merchant cash advance.

Simple and Automated Repayment System

Speaking of repayment, the best merchant cash advance loans also offer simple and automated repayment.

Everything can be set up and programmed with your point of sale or credit/debit card processing system in minutes, so that you never need to waste time going online to make a payment, or sending in a check, or anything like that.

It’s seamless, set it and forget it technology that leaves you to focus on more important aspects of running your business.

What Kinds of Businesses are Best Suited for an MCA Loan?

Merchant cash advances are not typically available from banks and traditional lenders. Rather, the best source of the best merchant cash advance loans is private companies, known as non-bank lenders.

These companies often don’t have the same kind of restrictions and eligibility criteria that hamstring banks, because they don’t take depositor accounts and don’t have certain FDIC and other covenants to respect.

Rather, they deal in small business lending only, and can therefore offer a full range of products, including those for companies with bad credit, like merchant cash advances.

The Best Merchant Cash Advance Loans Come From Private Lenders

One of the interesting things about merchant cash advances is that they may not be the best choice for every business, whereas a typical business loan can pretty much be put to good use by almost any business.

Merchant cash advances are really only suited to businesses that do the bulk of their sales, or generate the bulk of their revenue, through credit and debit card sales.

This means restaurants, boutiques, small service establishments, doctor and dental offices, and similar can greatly benefit from merchant business funding.

By contrast, businesses that do most of their sales through trade channels and accounts receivable really can’t make use of a merchant cash advance, as they would never generate any credit or debit card sales to repay the MCA loan.

Merchant Cash Advances from fundu

One of the best sources for the best merchant cash advance loans in the US is fundu.

fundu is a leading private non-bank lender, who deals exclusively in small business funding. With a range of small business funding products, outstanding customer service, fast funding, and easy-to-meet eligibility requirements, fundu is your one-stop-shop for all your small business funding needs, including merchant cash advances.

At Pineyro Group of Companies LLC, a family-owned holding company, our commitment to serving you and your clients spans over 22 years and in over 46 states through our dedicated divisions. For real estate funding within Florida, including owner-occupied and non-owner-occupied properties, turn to Pineyro Capital Group Inc. (NMLS 420112), our licensed entity originating loans. This division is run by Maria A. Pineyro and she may be reached at 1.833.247.5626 ext 700. Please note that for transactions outside Florida, our lending focus centers exclusively on real estate investment loans for business purposes. Primary residence loans outside of Florida are not within our scope. When it comes to real estate investment, Pineyro Private Capital is a renowned national lender, facilitating over $3 billion in business-purpose real estate loans across 46 states. We proudly partner with real estate investors and brokers, offering customized financing solutions for various ventures, including fix-and-flips, rentals, new construction, and multifamily properties. Additionally, our fundu Business Funding division stands ready to assist businesses of all sizes across the entire US. Specializing in business lines of credit and revenue cash advances, this division has already provided over $3 billion in funding to business owners. Whether you're a seasoned investor or a business owner, Pineyro Group of Companies LLC is your steadfast partner in achieving financial success. To explore how our diverse divisions can empower your real estate and business endeavors, visit us at Pineyro Group of Companies LLC.

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