Is MCA Financing a Good Idea for Small Businesses?

A merchant cash advance turns the traditional idea of a loan on its head. Instead of worrying about large debts and forgetting to make monthly payments, you can get working capital based on your future profits. Many companies use MCA financing, but that doesn’t automatically mean that it’s a smart idea for your business. How can you decide if this type of financing is good or bad for you?

What Are the Potential Downsides of a Merchant Cash Advance?

Any type of financing has pros and cons that you should consider. If anyone tries to tell you differently, they’re trying to sell you something. Even traditional bank loans with excellent interest rates can have downsides if you don’t prepare correctly.

MCA financing doesn’t have normal monthly payments, but that doesn’t mean there’s no cost at all. The cost comes in the form of percentage-based withdrawals from your future credit card revenues. Instead of making the full amount when your customers pay you, you’re trading a small percentage of the total earnings in return for an immediate cash advance.

How high are the costs? That’s where choosing the right lender is important. The situation is similar to choosing a partner for a business credit card.

Some respected lenders offer excellent terms and reasonable interest rates for small business owners. Others try to hide extra fees or excessive costs. You need to take your time reading the agreement and asking questions to get an excellent deal.

What Are the Benefits of a Merchant Cash Advance for Small Businesses?

If your business has a cash flow problem, the question isn’t whether you need financing but which type of financing to choose. You can’t let cash flow issues continue. They eventually damage your company’s reputation and relationships with suppliers and customers.

Without enough capital on hand, getting inventory becomes difficult. Delivering finished goods to customers on time is challenging. Product quality and profitability can suffer as a result.

A merchant cash advance is one solution to cash flow issues. The idea is that you can get funding instantly to cover those inventory purchases, supplier bills, shipping costs, payroll needs, and other operating expenses. Even though this service has a cost, the benefits can far outweigh the investment.

How Can You Decide?

MCA financing is fast and easy to qualify for as long as your business accepts credit card payments. You don’t need collateral, either. Before making a decision, speak with a trustworthy lender openly about any concerns and questions.