Merchant Cash Advance
Merchant Cash Advances (MCAs) are a pricey option that’s available to businesses that have credit or debit card sales. MCAs are probably the most expensive borrowing option, with APRs between 25% – 350%. Usually, they require a minimum daily payment regardless of your sales. Merchant cash advances can usually be approved in a day or two—with very little paperwork. After approval, the loan is repaid with a portion of your future credit card sales each day. Some online only marketplace lenders provide merchant cash advances.
You’ll pay for this convenience in very high interest rates. Merchant cash advances can be a quick way to get the funds you need without collateral (even if you have bad credit), if you are desperate or want to take advantage of a short-term opportunity that requires fast cash. However, relying on merchant cash advances can make it very difficult to manage future cash flow.
- Fast access to cash
- Flexible repayment terms
- Strong credit not required
- You choose how to use funds
- No collateral required
- Very, very expensive (70-200% APR)
- Minimum daily payments hurt cash flow
- Doesn’t help business credit
- My lock-in merchant processor
- Must accept credit cards.