There’s a lot of information about there about merchant cash advances. Some of it is accurate, some of it is not.
At its most basic level, an MCA is just an advance on future credit card receipts, one that allows you to get some money in the here and now in exchange for a daily portion of those future receipts.
I talked to Direct Capital Director of Client Services Scott Lynch, who previously answered questions and debunked myths for traditional working capital loans. What follows are two of the myths he encounters most often when it comes to merchant cash advances and his reactions.
Myth 1: I Can’t Afford It
“Well, yes you can, because it’s based on cash flow daily. Traditional loans require payments regardless of your businesses ebb’s and flows, a cash advance only takes payments WHEN you collect payment from your customer, true point of sale advance.”
You have to know how much is coming out of your daily sales receipts, yes, but this is a great way to remove the hassle and worry from paying off this particular loan. You get an advance on your receipts, and if your receipts roll in nicely, you end up paying it off quickly.
Myth #2: It Takes Too Long
“Fact is, Merchant Advances typically fund in 2-3 business days. As with all commercial financing, the quicker the customer submits info, the quicker they receive their funds.”
We’ve talked before about how working capital loans give you a quick turnaround from application to cash. A merchant cash advance can be even faster, allowing you to take on that project or urgent need and parlay your increased sales into a quick payback on the advance. Hard to argue with that.
Have you ever used a merchant cash advance at your business? If so, let us know what you thought.
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