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A merchant cash advance is a financing option where a business receives a lump sum of money in exchange for a portion of its future sales.
A business agrees to sell a portion of its future credit card or debit card sales to the advance provider. In return, the provider gives a lump sum payment upfront. The advance is then paid back through automatic deductions from daily sales.
Generally, any business with regular credit card or debit card sales can qualify, including restaurants, retail stores, and service businesses.
Funds from MCAs can often be received in as little as 24 to 48 hours after approval.
The main advantages include quick access to funds, no requirement for collateral, and repayment that adjusts with your sales volume.
To apply, you typically need to provide proof of monthly sales and business bank statements. The process is usually quick and can often be completed online.
Repayment terms vary but typically involve daily or weekly payments that are automatically deducted from credit card sales until the advance is paid in full.
No, there are typically no restrictions, and funds can be used for any business purpose, including inventory, equipment, expansion, or emergency funds.
Unlike traditional loans, MCAs do not require collateral, have flexible repayment terms based on sales, and often have shorter application and approval processes.
Disadvantages include higher costs compared to traditional loans, potential for frequent repayments to disrupt cash flow, and less regulation.
No, it is technically not a loan but a sale of future revenue. This distinction has implications for how it is regulated and its impact on credit scores.