It has gotten significantly more difficult for small businesses to obtain funding via a loan through a financial institution. In fact, almost 80% of small businesses that apply for loans through big banks are rejected. Entrepreneurs then resort to Merchant Cash Advances (MCA) based on its quick access to funds compared to loans which typically take about a few weeks to process and release funds. In contrast, a MCA provider can provide lump sum payments to a business owner who then repays the MCA like a loan. A key difference between a loan and an MCA is that loan involves lending money to a business which is then repaid over time with attached interest. The repayment on an MCA is centered around the account receivables of the company.
Reason Why A Business May Require Merchant Cash Advances:
- Growing the existing business by purchasing equipment or stock.
- Purchasing property for the business to expand.
- Contemporary marketing efforts.
- Renovating or expanding the current business premises.
- Improving the credit of the business.
- Trying to stay afloat during periods of slow business.
How Do Merchant Cash Advances Help Businesses?
In addition to being able to obtains funds fairly quickly, a MCA offers many incentives when it comes to small business financing such as:
- Significantly faster processing time than a bank.
- No collateral requirement.
- Benefits to the cash flow of the company.
- No restrictions pertaining to the usage of the funds.
- No UCC-1 requirement.
- Repayment of a MCA is contingent on the performance of the company.
Although MCA’s have features that are attractive to business owners, entrepreneurs fall prey to MCA lenders who target financially distressed businesses for their own benefit. If you have several MCA’s and have been unable to keep up with the payments, it is recommended to speak with an experienced Merchant Cash Advance Debt Relief lawyer. Our business debt relief lawyers will help you create an effective debt relief strategy. Schedule your free initial consultation today.