Merchant Cash Advance

Lender pays you a % of your sales in advance. Lender is automatically repaid from your EFTPOS transactions.

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Merchant Cash Advance overview

What Is A Merchant Cash Advance?

A merchant cash advance (also known as an MCA or credit card receivable funding) is a quick, easy way to get a cash injection for your business with no need to provide collateral (putting your house on the line!) or to have a great credit score. It can provide your business with a quick lump sum payment. This payment is then paid back in instalments based on a percentage of your sales.

A merchant cash advance is a unique type of loan facility in that the amount that is loaned (or ‘advanced’) is calculated and approved based on the turnover and sales of your business. Instead of having regularly scheduled repayments like other business loan products, merchant cash advances are paid off daily as a share of your sales.

Merchant cash advances are characterised by speedy funding, lower amounts of documentation & no need for security. All you need to show is that your cash flows are steady and regular.

Since merchant cash advances have such a fast turnaround time and don’t require credit checks or collateral, they are well suited to fast-paced businesses that receive a majority of its payments via card.

Pros & Cons Of A Cash Advance

Pros: ✓ No Collateral Required ✓ Repayments Are Automatic ✓ Access Cash Fast ✓ Steady Your Cashflow ✓ Simple Application ✓ Easier To Qualify ✓ Bad Credit Score ✓ Smaller Loans ✓ No Credit Impact ✓ No Restrictions ✓ Flexible Payments

Cons: X Higher Interest Rate than Bank Loan X Needs Card Payments X Short Term Financing X Less Flexible Repayments

Benefits Of A Merchant Cash Advance

Merchant cash advances often have a far easier approval process when compared to other business loan products. Providers have lower documentation requirements and often can complete an agreement without needing copies of financial statements, tax returns or other business documents. Less weight is also placed on personal credit scores as given the daily repayment structure of the cash advance, merchant cash advance lenders are more concerned about the cash flows of the business rather than your own personal credit history.

✓ Collateral Is Often Not Required Your merchant cash advance will be secured by your future sales. There is no collateral requirement. If you fail to pay, or take longer to pay, your assets are not at risk, nor is there any personal liability to pay off the merchant cash advance. Be careful to check if you are providing a guarantee as a director of the business though! This might mean that if you fail to make repayments, the lender is entitled to seek repayment from you personally.

✓ Repayments Are Made Automatically Repayments on your merchant cash advance are made automatically based on your credit card transactions. The automated payment system means you don’t have to manually make any payments and will be highly unlikely to incur any late fees as long as your business keeps generating sales.

✓ Gain Access To Funds Quickly Merchant cash advances can often be financed within one to two working days. Unlike bank loans that can take weeks or months to finalise, a merchant cash advance is relatively simple to apply for, process, and quick to receive.

✓ Keep Your Cashflow Consistent Merchant cash advances repayments are based on a percentage of your monthly sales. This means that if you have a slow sales month, you won’t have to make the same payment as you would if you had a good sales month. It keeps your cashflow steady.

✓ The Application Process Is Quick & Simple There is minimal paperwork required to apply for a merchant cash advance. They require little documentation, are mostly completed online, and are processed far quicker than typical small business loans.

✓ The Application Process Is Quick & Simple There is minimal paperwork required to apply for a merchant cash advance. They require little documentation, are mostly completed online, and are processed far quicker than typical small business loans.

✓ Less Stringent Requirements If you don’t qualify for a traditional business loan, you may still qualify for a merchant cash advance. Lender underwriting criteria are easier to meet than standard bank loans and they don’t require collateral or a guarantor.

✓ Your Credit Score Is Less Important Standard business loans will typically require that you have a good credit rating. A merchant cash advance however, is not as focused on this number as they are more interested in cashflow. This means you may qualify for a merchant cash advance even if you can’t get a bank loan.

✓ Gain Access To Smaller Loans It can be difficult to find lenders who will provide smaller business loans. A merchant cash advance provides business owners with access to as little as $5,000 cash. This means you do not have to take on more debt than you need.

✓ You Keep Control Of Decisions Unlike other business loans, you are free to spend the money as you please. You are not required to state what you plan to use the money for or provide an explanation to a lender.

✓ There Are No Fixed Payment Dates Or Amounts There is no set interest and the amount you need to pay back never changes. Unlike a typical business loan there are no late fees as payments are made automatically and there is no set repayment deadline to meet as it is based entirely on your cash flow.

✓ Less Stringent Requirements If you don’t qualify for a traditional business loan, you may still qualify for a merchant cash advance. Their underwriting criteria are easier to meet than standard bank loans and they don’t require collateral or a guarantor.

Drawback Of Merchant Cash Advances

Merchant cash advances tend to be more expensive than regular loans, so make sure you know the annual percentage rate (APR) so that you can compare to other loan products. Despite getting an advance of cash, given the lender takes a percentage of your daily sales it will reduce your cash flow relative to if you didn’t have the facility. Being dependent on future sales you should double check that your cash flow will be enough to cover the costs and leave you with enough cash to effectively run your business.

X They Cost More Than Other Business Loans The high cost of a merchant cash advance is reflective of the risk that the lender is taking on. It is the downside to all of the other benefits that is being provided by this form of finance.

X Not Suitable For Businesses With Low Card Payments Merchant cash advances are really only suitable for businesses who have a high volume of credit and debit card payments. They are not ideal for businesses that are paid primarily in cash as repayment would take significantly longer.

X They Are A Short-Term Solution Companies requiring long-term financing are not ideal candidates for a merchant cash advance. Most lenders require that business owners complete their repayments within a year. This is why cash advances are more expensive.

X Some Fine Print Can Reduce Your Flexibility Some lenders may prohibit you from making any fundamental changes to the way you run your business. This can include switching credit card companies, offering cash discounts, or allowing you to revise your hours of operation.

Common Reasons To Take Our A Merchant Cash Advance

Merchant cash advances are one of the fastest ways to secure funding for your business and are suitable for a wide range of business purposes. If you have had any adverse events on your personal credit report but your business has steady sales then a merchant cash advance could be a fantastic product for your business.

  • Pay Urgent Bills
  • Marketing Opportunities
  • For Seasonal Needs
  • Purchase Equipment
  • Hire New Employees
  • Cover Expenses
  • Renovate Or Expand
  • Purchase Stock

Eligibility & Application

Applying for a merchant cash advance is a fairly different process to other business loan products. Lenders do not require as much business information and are less concerned with your personal credit score given the facility is effectively backed by your sales.

What lenders are concerned about is whether your business has predictable, regular steady cash inflow so that they are able to be paid back a percentage of the sales volume for the loan drawn out.

Should You Apply?

Merchant cash advances are suited to businesses that use credit cards to take payments and have a credit card transaction history. It is ideal for businesses that want to avoid making steep payments and want the payments to fluctuate with the sales of the business. The fast nature of MCAs means they are well suited to immediate cash needs.

Some of the common industries who take out merchant cash advances include hospitality and retail businesses.

Ways You Can Apply

Apply Online Use our wizard to find and apply for an unsecured business loan.

Speak To Us Give us a call on 1300 780 568 for a no-obligation chat with a specialist.

Chat With Us Live chat with one of our loan advisers by clicking the button below.

Top Reasons You Could Be Declined

There are a few requirements lenders make of business owners before offering merchant cash advances. To avoid being declined for an MCA, speak to one of our credit specialists. We work with over 70 lenders so we can help you find a lender, loan and rate that will work for you and your specific needs.

  • Lack Of Credit Card Payments
  • Outstanding Debt
  • Young Business
  • Weakening Industry
  • Inconsistent Revenue

Frequently Asked Questions

What Are The Merchant Cash Advance Fees?

Merchant cash advance fees are unique in the business loan industry. Unlike traditional business loans that have an interest rate, a merchant cash advance providers charge a “cost of capital” fee, usually somewhere between 1.1x to 1.4x of the amount that was advanced i.e., if you borrowed $100k, your total repayments might be between $110k to $140k.

The total fees of your merchant cash advance will depend on the amount you want advanced, the term length and the total holdback amount (i.e., the % proportion of daily sales that are going towards paying off the advance).

In addition to the above merchant cash advance fees, some lenders will charge additional fees. These could include a monthly account keeping fee, assessment fee, processing fee, or establishment fee.

To find out what your total fees would be for your requested merchant cash advance, give us a call on 1300 780 568 or use our loan wizard.

How Quickly Can I Get A Merchant Cash Advance?

A merchant cash advance is one of the fastest forms of business financing. It does still vary from client to client but can be funded in as little as 24 hours. Factors that influence how fast you get your funds include; the lender, your cashflow, the terms you require, and how quickly the required documents are provided.

How Can I Get A Merchant Cash Advance Online?

The application process for a merchant cash advance is simple and fast, meaning a majority of the application can be done online. You can start the online application process by using our free online loan wizard and submitting your details. From there one of our credit specialists will get in touch to process your application and collect the required documentation.

Can I Get A Merchant Cash Advance With No Credit Check?

Because Merchant Cash Advances provided based on your volume of sales and overall health of your business, your credit score is not as important of a factor. For this reason, there may be some lenders who are willing to lend to you either without a credit check or if you have a bad credit score, but rates will likely be higher.

Can I Get A Merchant Cash Advance If I have Bad Credit?

Depending on the lender and your specific business, you may qualify for merchant cash advance even if you have a poor credit score. The lender will take into account the overall health of your business and cash flow to determine if you are eligible, and will typically charge higher fees to mitigate their risk.

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