At some point, you may find that your small business needs some capital. While it’s true that traditional loans are an option, another viable option is a merchant cash advance or MCA. This is a great option for businesses that collect payments via credit card because this is how the amount is repaid.

What is an MCA?

An MCA is defined as a lump sum of cash provided to a business against its future credit card sales. It doesn’t have the technical details of a traditional loan such as fixed repayment terms and collateral.

This is a lot like factoring in which the lender provides an advance of cash against an invoice and collects the invoiced amount as well as a fee at a later date. The companies that offer this option don’t label themselves lenders, so they are outside of banking laws/regulations that traditional lenders fall under.

With an MCA, the receivables of a business are in the form of credit/debit card sales. This is riskier than factoring because there’s no guaranteed invoice. Therefore, the interest rates are higher. However, there are still situations in which a business must take an advance such as this.

How Can an MCA Benefit Small Business

More than likely, you’ll need financing for your business at some point. You may be relocating, hiring new employees, or purchasing new inventory. Over the past few years, this type of financing has become popular for businesses that are seeking to accomplish certain financial goals.

Following are a few ways an MCA may benefit your small business:

-Less documentation/simpler approval process
-Flexible requirements
-No collateral is required
-Faster funding
-No amortization

Final Thoughts

At some point, every small business is going to need an infusion of funding. There are many different ways that you can get this funding for your business. One popular way is through a merchant cash advance. Contact Rexford Commercial Capital to learn more about MCAs and other potential solutions for your funding needs.