3 Myths About Merchant Cash Advances
A Must Read for all Small Business Owners
Merchant cash advances are a great option if your business needs a quick influx of additional working capital, and accepts frequent, small credit card payments However, many people don’t consider merchant cash advances when looking for business financing. In this post, we’ll review some myths about merchant cash advances so that you can fully understand this product, and decide if it’s right for you.
Myth #1: Merchant Cash Advances (MCA) are Loans
Although the process of acquiring a business loan and merchant cash advance are similar, they aren’t the same product. In fact, business loans require a longer commitment with a fixed repayment schedule. In comparison, cash advances are remitted based on a set percentage of your business’s daily or weekly credit card sales.
Myth #2: MCA's Have High-Interest Rates
Merchant cash advance options are typically based on your business’s sales volume, projected income, and the funder’s requirements. In addition, providers typically don’t charge interest rates because merchant cash advances aren’t loans. Instead, they expect anywhere from 5 to 20 percent of your future credit card sales.
Myth #3: Only Desperate Businesses Apply for MCA's
For whatever reason, people assume that only failing businesses pursue cash advances. In reality, it’s quite the opposite. With 63-80 percent rejection rates, traditional loans aren’t always accessible to small businesses. When a business applies for a cash advance, they likely require quick working capital. Therefore, a business utilizing a cash advance shows confidence in its ability to use a cash influx to boost revenues!
Cash advances are more beneficial than loans for businesses who need financial flexibility. They can fulfill their obligations based on the amount they are paid. With a loan, you’re expected to make set payments, which can cause financial stress if you don’t have enough money on-hand.
Before you decide, it’s important to understand the truth behind rumors you’ve heard about MCA's. Arm yourself with knowledge, and use it to boost your business’s revenues!