A new small business is always looking for ways to prop itself up in the short term so the founders can get closer to achieving their long-term goals. This is why a merchant cash advance (MCA) is an option: it allows a business to get cash quickly without going through the applying and approval process of a more rigorous small business loan. Before you go out and get an MCA, it’s important to figure out if it’s right for your business. Here’s what you need to know.
Note: This article is intended to provide a definition of what an MCA is and what it does, and it should not be considered financial advice. We encourage small businesses to research all lending options available to them before making any commitment.
A merchant cash advance comes from a lender and is different from a traditional bank loan. A lender who offers a merchant cash advance will look at your credit card receipts and assess how much you need and how much you could pay them back. The contract you sign with the MCA lender will outline the amount you’re getting and how much interest you’ll have to pay back. Interest rates can vary widely between companies. The state your business is based in also plays a factor in how much you ultimately have to pay, as some states place limits on interest rates.