Who is a Merchant Cash Advance for?

While not advisable as a long term strategy for accessing cash, an MCA might be the best option to take advantage of a short term business opportunity such as purchasing inventory at a discount. It might also be used by operations that conduct business almost entirely through credit or debit payments but don’t have a good credit score and so can’t qualify for other types of financing.

Merchant Cash Advance Details

A quicker alternative to more traditional funding methods, a Merchant Cash Advance (MCA) can allow merchants to sidestep the lengthy approval process of other loan types and borrow cash against future sales. In fact, an MCA isn’t technically a loan, but rather, as the name suggests, a cash advance. Once you’ve qualified, your MCA provider will lay out in the advance agreement the amount of cash they are willing to advance, the term of the advance, the holdback, and the repayment structure. The holdback is the percentage of daily credit or debit card sales which are withheld to pay back the advance. MCA providers evaluate risk differently than banks and other financial institutions. While your credit score may be important, they will evaluate the amount of cash they are willing to advance by reviewing your daily credit or debit card receipts to determine your ability to repay the loan. There are two main advantages to an MCA over other types of traditional business financing. First, the holdback amount will be in direct proportion to sales. When business is booming, the debt will be paid down quickly, but if business is slow, you won’t find yourself struggling to come up with fixed payments. Additionally, collateral is not required for an MCA.

What are some benefits and drawbacks of Merchant Cash Advance?

Benefits: Lukewarm credit OK Relatively easy application process Quick access to cash Can be used for a wide variety of purposes Drawbacks: Relatively high Annual Percentage Rate (APR) Payments reduce daily cash flow May be required to switch merchant service provider

How do I qualify for a Merchant Cash Advance?

Minimum Credit Score: 400 Minimum Time in Operation: 5 months Minimum Revenue: $75,000 annually

How does Merchant Cash Advance Interest work?

Interest Rates on MCAs can be substantially higher than for other forms of business financing so consider carefully if this option is for you. Traditional business financing. First, the holdback amount will be in direct proportion to sales. When business is booming, the debt will be paid down quickly, but if business is slow, you won’t find yourself struggling to come up with fixed payments. Additionally, collateral is not required for an MCA.

Is it possible to get a Short Term Loan for a startup or small business?

It is possible to get a short term loan for a startup or small business, however be prepared for more stringent qualification requirements. In addition to the documentation already noted above, you may also need to provide projected cash flow statements and projected financial statements for the next 3 to 5 years. In addition, you’ll need to clearly lay out in your financial projections how you plan to repay the loan. Even with all that, if your business is a startup it’s most likely that you’ll only qualify for a secured loan, so you’ll need some personal assets such as real estate.

What are the Interest Rate's for a Short Term Loan?

Short term loan interest rates are economy-dependant. In a normal or boom economy, interest rates on short term loans will be higher than long term loans, however, in a recession, short term loan rates may be lower than those for their long term cousins. The interest and repayment requirements of short term loan rates can be calculated in different ways and obviously you’ll want the calculation that is most in your favor. Our experts at Big Think can assist you with finding a lender who will provide your business with the most favorable terms.

How do I qualify for a Short Term Loan?

Minimum Credit Score: 500 Minimum Time in Operation: 6 months Minimum Revenue: $100,000 annually

What are the Benefits and Drawbacks of a Short Term Loan?

Benefits: Lukewarm credit OK Limited paperwork Quick access to cash Can be used for a wide variety of purposes Drawbacks: Relatively high Annual Percentage Rate (APR) Capped loan amount Daily payments

More on Short Term Loans

Short term financing is an essential option for small businesses. Buying inventory, covering working capital expenses while awaiting payment of invoices, and expanding operations are just some of the uses small businesses have for short term loans.While the overall structure of short term loans is similar to their more common relative, long term loans, there are some important differences. As with long term loans, your business will need to qualify with the lender. In addition to your credit score, the lender may also want to see records of previous loan repayments, payment histories to your suppliers and your company’s cash flow history, preferably for the past 3 to 5 years. An income statement may also be required. Depending upon these factors, and the lender you’re dealing with, your loan may be secured against collateral or unsecured, also known as a ‘signature loan’. Payment schedules also differ. Where traditional long term loans usually require monthly payments, short term loans may have payment schedules as frequent as every business day.

FAQs – Page 3 – Cashifi

Who is a Merchant Cash Advance for?
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Merchant Cash Advance Details
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What are some benefits and drawbacks of Merchant Cash Advance?
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How do I qualify for a Merchant Cash Advance?
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How does Merchant Cash Advance Interest work?
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Is it possible to get a Short Term Loan for a startup or small business?
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What are the Interest Rate’s for a Short Term Loan?
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How do I qualify for a Short Term Loan?
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What are the Benefits and Drawbacks of a Short Term Loan?
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More on Short Term Loans
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FAQs