How Does Merchant Cash Advance Work?

It is very obvious to consider a merchant cash advance if you are in need of fast money for funding your business. The product is also popularly known as the “business cash advance”. It is almost similar to a “paycheck advance” that is often provided to the consumers. But the question is about how merchant advance cash works, how much does it cost etc always remain unanswered. Therefore, we have enlisted down some basics so that readers can get to know more about business financing.

Merchant Cash Advance in Canada

What is exactly a merchant cash advance?

A company that provides merchant cash advance in Canada offers small business entrepreneurs an advance that can easily be applied against their future sales. This genre of financing is mainly helpful for those businesses which tend to have a steady number of credit card sales. This also includes medical offices, restaurants, retail stores etc.

Individuals have to apply for it first. The documents that are most needed are:

  • Individuals need to bring proof of their identity. This can include their state-issued ID card.
  • All credit card processing and bank statements are also required.
  • Individuals are also required to submit their business tax returns.

It is recommended to be well-aware of your credit scores. During the process, the lender can also run a quick soft credit check on the borrower’s personal credit.

What are the benefits of a merchant cash advance?

The main perk of applying for a merchant cash advance is that one can get the mentioned sum of money within a day or two. And, the qualification rate for it is also very easy. Individuals won’t be needing any kind of collaterals. Also, the requirements of your credit score are pretty flexible. It has been observed that the financing company seems more interested in the borrower’s sales history. His credit history is rarely checked or verified. Also, if individuals are able to show their possession of a certain volume of debit or card sales, then there is a high possibility of them to qualify for the MCA.

Merchant Cash Advance in Canada

MCA comes with another advantage and that is it comes with flexible payments. It is generally advised to make your repayment plan on the basis of the percentage of daily sales. This will make your repayments less hectic and also, you won’t be needed to pay back more when your sales are going low. This method is indeed helpful for those businesses which come with fluctuating sales.

Last but not the least, the funds extracted via an MCA can be utilized for every business expense.

How much does a MCA cost?

This can be quite tricky because an MCA’s cost isn’t dependent on APR i.e Annual Percentage Rate or any interest rate. It has been observed that if MCA is calculated as an MCA, then it could cost more than other variants of business loans.

Is going for a MCA a good idea?

Since MCA deals with a low barrier for cash approval, therefore it could prove to be very beneficial for those businesses which require immediate cash for funding. But, it should also be noted that an MCA is more expensive than an ordinary bank loan. Also, other financing options like the line of credit or bank loans are generally recommended to those who have been at least in business along with good possession of strong revenues and credits.