BusinessCash is funding during the COVID-19 crisis.

For many years the business world faced the challenge where it had numerous aspiring entrepreneurs but no capital to support their ideas and dreams. Today, we live in times where there is a variety of financing options available to small businesses. One such option is the Merchant Cash Advance (MCA).

How to lower a mca payment

What are the ways to lower an MCA payment?

What is a Merchant Cash Advance?

A Merchant Cash Advance (MCA) is a type of funding which isn’t a loan. MCA refers to the lump-sum payment received by a business in exchange for future credit/debit card sales receivables. It is one of the most popular methods several small business owners are using. This will deal with credit cards (restaurants and other retail merchants).

Cash advance providers supply funds based on a business’ monthly volume of credit/debit card transactions. When traditional small business financing is unavailable, and bank loans are difficult to get due to bad credit. Also, this funding method can be for quick cash requirements. The catch is that this is one of the more expensive sources of working capital for a small business.

How does Merchant Cash Advance Works?

The business gets a cash advance from a provider. Usually approved and funded in just a day or two, and with very little paperwork involved. In turn, it agrees to pay back the advance, plus a fee, by letting the funding provider take a portion of their credit card sales each day until the entire amount has been repaid.

An Example of Merchant Cash Advance

A business sells $100,000 of a portion of its future credit card sales for an immediate $80,000 cash payment from a finance company. The finance company then collects its portion (generally 10-25%) from every credit card and debit card sale. This will continue until the entire $100,000 is collected. Though this is a costly source of funding since the debt is being paid every day, it doesn’t pinch. If the numbers are calculated wisely, this can prove to be of great benefit for the short-term cash requirements.

If paying back the MCAs has become a challenge, consider what many small businesses are opting for:

  • Many small-business owners with merchant cash advances opt to refinance their debt with online small-business loans. This is because MCAs often have triple-digit annual percentage rates. Once the lender is chosen, the process of refinancing is very similar to getting a small-business loan from scratch. The lender will finance by the creditworthiness of a business and its ability to repay the new loan. On approval, the lender will use the term loan to pay off outstanding MCA balance.
  • Consolidating your MCAs with a Factoring Company can often lower your overall rate and provide you with a lower and single monthly payment.
  • Focus on lowering the retrieval rate (instead of the factor rate). By lowering the retrieval rate, a company will reduce the amount of money it’s paying monthly, extend the payback period, and lower the effective APR (Annual Percentage Rate). Ideally, the expected payback period should be 18 months.
  • Businesses that receive payments via Square or PayPal may be able to get a less expensive MCA.
  • Use the cash advance to generate new income streams. Otherwise, the business will create more significant problems than solving them.

Bottom line is if the business is confident of generating enough cash, and with the right volume of increased sales, this financial tool can make good sense. Make diligent and calculated use of this source (MCA) to derive maximum benefit.

Get funding using MCA today! Call (888) 400-5930 or use the fast, safe & secure online funding application.

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