Merchant Cash Advance

money from a merchant cash advancementWhen a business needs money to grow, purchase equipment, make payroll or whatever they will usually go to their local bank and apply for a loan. Banks are conservative and are very selective with the types of business loans they want to fund. This is a big reason why so many local businesses get turned down for loans from banks.

Many businesses across the USA are using merchant cash advances because the process is simple and you can get the funding you need within days.

What is needed in order to get unrestricted business funding?
• 3 months in business
• $10,000 a month in credit card sales (could be less in some cases)
• Tarnished credit is OK

We can work with most situations and industries and will work hard to offer the lowest rates. Our overhead is really low since we don’t mail flyers through the postal service every week. Call us for more information.

How Do These MCA’s Work?

Merchant cash advances are not a loan but actually are considered to be a purchase of future sales. (Via credit cards) When determining the amount of funding to provide, the finance company will look over your bank statements, credit card sales, commercial sales as well as other information that may need to be reviewed by the company’s underwriter. The information you give them allows the underwriter to gather sales performance information so that they can get a good idea of what your future sales will be.

When starting the MCA process and a new client asks us “what is the interest rate for this kind of loan?” I immediately know that they have never utilized this type of funding before.

Whats a Factor Rate?

money from a business loan mcaThere is no interest rate, what is used is a Factor Rate. This type of rate is not expressed in percentages like interest rates are, instead factor rates are expressed as a decimal figure. The figure ranges from 1.1 to 1.5 which will show how much money you will be paying back. A factor rate consists of time in business, type of industry, the perceived risk of your account, how consistent are sales and average dollar amount of those sales.

There are several variables that are built into a factor rate. So when you apply for a merchant cash advance you will know how they work.

When paying back a cash advance a company will be using a percentage of its daily credit card sales, every day, Monday through Friday.

To figure how much is going to be paid back, lets take a look at this example on what a Factor Rate is…

Step one – Multiply factor rate by the amount of money borrowed.

Next – Let’s say you have a MCA of $10,000 with a factor rate of 1.40 for twelve months

The re-paid amount will be $14,000

Because… $10,000 X 1.40 = $14,000

It looks like your paying a 40% interest rate for this cash advance. However that is the incorrect way to consider what is a factor rate.

The fee or cost of this merchant cash advance is $40% however there is a factor rate involved. When this advance is originated all that interest is charged to the principal. That is how interest rates and factor rates differ and the reason why APR is not utilized in pricing. APR (annual percentage rates) APR is used for financing where interest accrues on the principal amount as it gets smaller and smaller as more payments are made.

About making the repayments… As I mentioned above they are daily and the agreed portion or percentage is taken out of your daily sales. So if one day you make more money than the other days, then more would be taken out. This also means if you have a slower sales day, then les is taken out.

This type of funding is not cheap, but if your company needs an infusion of cash quickly then this can work for you. If you can wait 60 to 90 days an SBA loan could be an option, but good credit is necessary along with tons of paperwork.

So as you can see there many businesses need those funds quickly and are OK with what they are paying back.

If your business has a need for funding, then contact us and we’ll be able to give your more information and explain how to get started.

The application is simple and only 1 page. Some paper work will need to be submitted to us for the underwriter to review your file. The faster we get your application and paperwork the faster you can get the money, when approved!

All funding applications subject to underwriting guidelines.

Find Out More Now, Call: 972-715-1618

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