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What is a Merchant Cash Advance (MCA)?

 

As businesses are forced to keep themselves afloat and face challenges of this current economic environment, they may turn to merchant cash advance as a means of business funding. A merchant cash advance (MCA) is a type of financing option that is available to small businesses and merchants. It allows businesses to receive an advance on their future credit card sales in exchange for a percentage of those sales. MCAs are a popular alternative to traditional bank loans and are typically easier to obtain, with fewer requirements and a faster approval process.

In a merchant cash advance, a lender provides the business with an upfront lump sum of cash in exchange for a sale of the merchant’s future sales and collections. The business then repays the advance, plus a fee, over time through a percentage of their daily credit card sales. This means that the repayment amount fluctuates based on the business’s sales, making it a flexible option for businesses with fluctuating sales patterns.

One of the key benefits of a merchant cash advance is the fast and easy application process. Unlike a traditional bank loan, an MCA does not require a lengthy application process or detailed financial information. Instead, the lender typically only requires information about the business’s credit card sales history to determine the amount of the advance and the fee.

Another advantage of a merchant cash advance is that it can be a good option for businesses with poor credit or limited financial history. Unlike a traditional bank loan, the approval process for an MCA is not based on a borrower’s credit score or financial history. Instead, the lender is primarily concerned with the credit card sales history of the business.

However, it is important to note that merchant cash advances can be more expensive than other financing options, with higher fees and higher interest rates. The exact cost of an MCA will vary based on the lender and the terms of the advance, but businesses should be aware that the cost can be substantial.

In conclusion, a merchant cash advance is a type of financing option that allows businesses to receive an advance on their future credit card sales in exchange for a percentage of those sales. MCAs are a popular alternative to traditional bank loans and offer a faster and easier application process, but they can also be more expensive. Businesses should carefully consider the terms and costs of an MCA before proceeding with this type of financing.

The attorneys at Beress & Zalkind are very familiar with structuring and analyzing merchant cash advance contracts and regulatory issues that continue to evolve in our current turbulent economic environment.

Reach out by calling 212 390 0325 or 718 513 3588 or by email at info@bzlawgroup.com.

Our attorneys are licensed in New York, New Jersey and Florida.

About the Author

Ella Zalkind
Ella Zalkind
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