Is A Merchant Cash Advance Right For My Business?

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Businesses that lack access to traditional sources of credit like bank loans have alternatives, including a merchant cash advance (MCA). Whether an MCA is right for your business depends on your ability to repay the advance. If you default, your business and personal assets might be at risk. That’s where comes in.

We provide merchant cash advance assistance to businesses around the country. If your business is at risk of defaulting on an MCA agreement, turn to Our debt relief specialists work with struggling businesses like yours to reconcile their merchant cash advances. Contact our office today by completing the convenient intake form to get started.

How Does A Merchant Cash Advance Work and Why Is It Right For Your Business?

The first thing to know is that a merchant cash advance is not a loan with a set repayment plan and interest charges. Instead, an MCA is the purchase and sale of future receivables in exchange for upfront, lump-sum cash. The advance is based on a percentage of the business’s future credit card sales and repaid through fixed daily withdrawals directly from its bank account.

Reasons Your Business Would Take A Merchant Cash Advance
A merchant cash advance is well-suited for a small business that needs working capital but does not qualify for a business loan or line of credit. The proceeds can be used for:

  • Purchasing inventory
  • Hiring staff
  • Meeting payroll
  • Purchasing new equipment
  • Covering unexpected business expenses

Business loans typically require owners to have good credit and an established history. By contrast, the criteria for an MCA are less stringent. Credit ratings are not a factor for approval – though that may impact the cost of funding. While the approval process for a business loan can take weeks or months, a merchant cash advance is approved more quickly, sometimes on the same day, and funds are available within 24 to 48 hours of being approved.
As mentioned above, the advance is repaid from a fixed percentage of future sales, regardless of sales volume. Because your sales likely fluctuate over time, making monthly installment payments on a business loan may not be workable. So, a merchant cash advance provides more repayment flexibility than a business loan.

Finally, unlike a bank loan, a merchant cash advance does not require collateral. The MCA provider considers your current sales to determine how much to advance and the percentage of daily withdrawals.

The Downside Of A Merchant Cash Advance That May Not Be Right For Your Business

There are several disadvantages to merchant cash advances, the first being that MCAs are an expensive form of financing. An MCA is not priced based on an interest rate or an APR (annual percentage rate) but a factor rate expressed as a decimal figure ranging from 1.2 to 1.5. When converting the factor rate into an APR, that figure can rise to the triple digits.

Another feature of a merchant cash advance is the holdback amount or the percentage of daily sales the MCA provider deducts from your daily credit card sales to repay the advance. The holdback could trigger a cash-flow shortfall, putting your business at risk of closing.

Also, merchant cash advance agreements often require onerous provisions, such as a confession of judgment (COJ), in which you accept liability for the advance and waive all legal defenses. The funder can quickly obtain a court judgment and begin seizing your business assets if you cannot pay back the advance.

Finally, the MCA provider will likely require you to sign a personal guarantee pledging your assets (e.g., home, cars, bank accounts). If you default, the funder will move to levy those assets. With so much at stake, working with an experienced merchant cash advance lawyer is essential.

How We Can Help Reconcile Your MCA

Options are available if you have taken a merchant cash advance and are struggling to repay it. An MCA agreement should include a reconciliation clause that requires the funder to restructure the repayment plan if your business experiences a receivables shortfall. You must notify the MCA provider of the shortfall and demonstrate that your business will return to profitability.

The experienced debt relief specialists at will negotiate the repayment plan with the funder on more favorable terms. That will give you breathing room, prevent default, and help to avoid business bankruptcy. We have comprehensive knowledge of merchant cash advances and will protect the business you’ve worked hard to build.

Contact Today

Whether you are considering a merchant cash advance for your small business or facing an event of default, our experienced debt relief specialists can help. Contact our office today by completing the convenience intake form. Our debt relief specialists are available 24/7.