To raise capital and funds for your business on a short notice and with ease, there are a whole lot of options and source available. One of the most preferred among small businesses is the merchant cash advance (MCA). This is considered by most as a shortcut to funding which provides you the convenience to grow and sustain cash flows on a temporary basis.

How MCAs work

Merchant cash advance, as the name suggests, is an advance and not a loan that is extended to a business on the basis of its outlook and after the assessment of its future income generation capacity and capability. The advance is given to the borrower in the form of a lump sum. This amount is then automatically repaid with respect to a certain percentage that is used as per your daily credit card receipts.

The percentage figure that is used for this advance here is referred to as a retrieval rate or a holdback rate and not as an interest rate. This figure might be somewhere in between five percent to 20 percent depending on the size of the amount that has been extended to you as an advance. The tenure for which the advance is available to you also varies and it may be as short as 90 days or last for 18 months.

The repayment begins immediately, with respect to the holdback rate, as soon as the funds are received.

For the determination of the amount to advance the average credit card sales are required. The provider or the lender would generally assess the receipts of the past three to six months and calculate on basis of it that how large of an advance you’re eligible for.

Who should consider taking MCAs

These advances are most suited for businesses who want a quick access to cash to run the day-to-day operations and also have an appropriate and well-managed transaction history of the credit card. Restaurants, retailers, or businesses that haven’t been in operations for long are some of the examples for whom a merchant cash advance is a suitable option.

Advantages of using an MCA

Straightforward application process

The process for applying for an MCA is entirely online. You simply need to fill the application form. Upload other required documents like bank or credit card statements, business tax returns, and others to smoothly walk through the process.

Quick funding

Once the application process is completed you then wait for it to get approved. But the upside here is that you don’t need to wait long as it gets approves within a couple of hours of submission and funds are transferred to your account in a few days (mostly 5 to 6 days).

No collateral required

MCAs do not require collateral as they are a sort of unsecured business loan. Unlike approaching a bank for a business loan, here you do not have to put any business or personal assets on the line to obtain an advance.