What is a Merchant Cash Advance and What are the Benefits for Small Businesses?

Small and medium-sized business owners often require capital quickly in order to remain operational and grow to successfully compete in their respective industry. While some companies are able to access low interest loans or have the luxury of being funded by a venture capital firm, others – particularly small businesses starting out – may find the process of securing capital daunting.

Furthermore, small businesses in distress and facing mounting debt may be unable to access any type of capital at all, leaving their potential future in jeopardy.

One common avenue that distressed small businesses may turn to is a merchant cash advance. While this option is often viewed as risky, it can be appropriate for certain small businesses depending on their specific circumstances. That said, a merchant cash advance is not right for everyone (and some small businesses may be in need of merchant cash advance debt relief).

Below we will review what a merchant cash advance entails, what such an option may be used for, and discuss the benefits and drawbacks depending on your company’s unique financial circumstances.

What is a Merchant Cash Advance (MCA)?


A merchant cash advance falls under the category of alternative financing and is different from a typical small business loan. In fact, merchant cash advances (MCA) are actually not considered loans at all. Instead, a merchant cash advance is an upfront sum of cash that is provided in exchange for a percentage of your company’s future sales (typically via credit or debit cards).

Historically, merchant cash advances have been utilized by retailers and restaurants – companies with revenue that draws primarily from debit and credit card transactions. However, over the past few years merchant cash advances have been made available to (and utilized by) businesses that do not operate mainly through debit and credit card transactions.

Depending on a company’s needs and financial situation, a merchant can advance may be a workable option that can offer quick access to capital when needed most.

What is a Merchant Cash Advance Used For?

A merchant cash advance is used to help infuse your small business with quick cash that can be empowering – ensuring it not only remains operational but thrives. Essentially, depending on your small businesses’ situation, a merchant cash advance can be viewed as selling a company’s future sales at a relative discount.

Merchant cash advances can be structured in two different ways:

  • An upfront sum of cash in exchange for a percentage of future debit and credit card sales
  • An upfront sum of cash that is repaid through fixed debits (either daily or weekly) from your bank account – also known as ACH or Automated Clearing House withdrawals

ACH merchant cash advances have become more popular in recent years. In fact, although merchant cash advances originally were restricted to a daily percentage of future debit and credit card sales, the ACH option has now become the primary way that MCAs are structured, allowing businesses that do not primarily operate through debit or credit card transactions to take advantage of this means of accessing quick cash.

The amount your business ultimately pays after receiving a merchant cash advance will depend on the factor rate. A merchant cash advance factor rate is determined by your ability to repay the capital. Once risk assessment is conducted, your businesses’ factor rate will be set – with a higher factor rate equating to a higher amount that must be paid in fees. MCA factor rates typically vary between 1.2 and 1.5. When you reach out to National Credit Partners for a free consultation, we’ll review your company’s financial situation and, if it is determined that a merchant cash advance is right for you, work to create an agreement offering the lowest possible factor rate.

What are the Benefits of Using a Merchant Cash Advance?


A merchant cash advance can offer certain small businesses a number of benefits. Some of the most commonly cited benefits of merchant cash advances include:

  • Quick Access to Cash: Merchant cash advances are often approved within a couple days
  • Easy Application: The application process is quick and simple (without much documentation required)
  • Fast Approval: While most traditional business loans take weeks to process, MCAs can be approved within a matter of hours in some cases
  • No Credit Collateral Required: MCAs are unsecured, meaning no physical collateral (such as business assets) is required upfront. And since you don’t have to provide any collateral, you don’t risk losing any collateral in the process either.
  • Slow Sales Mean Reduced Payments: MCA payment schedules can be based on a fixed percentage of any sales – meaning that if your sales are down in a particular month, a correlation with lower repayments for that period will be assured

What are the Drawbacks of Using a Merchant Cash Advance?


Although a merchant cash advance may be a good option for your business, they’re definitely not for everyone. Let’s look at some of the drawbacks of merchant cash advances:

  • Potentially High Interest Rates and Fees: Depending on how your merchant cash advance is structured, you could be facing high interest rates and fees. For that reason, it’s important that your company thoroughly evaluate its financial situation before entering into a merchant cash advance.
  • Lack of Regulation: As merchant cash advances are not technically considered loans, they are not subject to the same type of regulation. Accordingly, you’ll want to conduct due diligence and research any company offering a merchant cash advance before entering into any type of agreement.

How Can a Merchant Cash Advance Impact Business Cash Flow?


Perhaps the greatest advantage of a merchant cash advance is the potential for your company to increase its cash flow immediately. For some distressed small businesses, a merchant cash advance can not only be a lifeline but a lifesaver, allowing companies to remain operational and receive an immediate cash infusion.

Is a Merchant Cash Advance Right for You?


With National Credit Partners, you may find that our merchant cash advance options provide much more benefits than drawbacks. As the premier and Better Business Bureau A+ rated debt consolidation company, National Credit Partners is comprised of financial professionals specializing in helping small and medium-sized businesses like yours achieve the debt relief they need. We’ll work with you to determine whether or not a merchant cash advance is appropriate and can serve as a lifeline for your small business. Moreover, if a merchant cash advance option isn’t right for you, we’ll help you find the best alternative (rather than pushing you into an agreement that would not be beneficial).

Additionally, if your business has entered into a merchant cash advance and that agreement has become untenable and left you with insurmountable debt, National Credit Partners can offer options to help you find relief.

Some debt relief options that could be right for your small or medium-sized business after a merchant cash advance include:

  • Merchant cash advance (MCA) consolidation loans
  • Merchant cash advance (MCA) debt relief
  • Merchant cash advance (MCA) debt consolidation
  • Merchant cash advance (MCA) debt settlement

Regardless of your company’s financial difficulties, National Credit Partners can offer a solution that allows you to remain in business without having to resort to bankruptcy or costly litigation. We’ve successfully helped businesses that were in default, collections, facing legal action, and forced to contend with various other debt relief challenges qualify for traditional financing (like SBA or term loans) after graduating our program, and we’re here to help your business find a solution – whether it’s through a merchant cash advance or alternative avenue.

Unlike other debt relief companies, we offer unique advantages to help your business get back on track. You’ll have peace of mind knowing:

  • We provide attorney representation for all of our clients to assist with permanently modifying/restructuring their advances
  • We strive to ensure all advances are shown as ‘paid in full’ rather than ‘settled for less’ – assuring your business remains in good standing with lenders and qualifies for future financing

Contact us today at (949) 676-0146 or fill out the form below to arrange for a free and no obligation consultation with one of our dedicated team members. We’ll review your company’s specific circumstances thoroughly and discreetly, and utilize our decades of experience and proven results to help you successfully modify your existing debt.

Don’t settle for an unproven financial advisor that could potentially make your business’s financial situation worse through inexperience. Choose National Credit Partners, the company offering direct, strong, and proven relationships established with countless creditors. We’ve helped companies like yours achieve the financial solutions they need to make a fresh start through either a merchant cash advance or alternative debt relief option that is right for you.

Fill out the form below and one of our team members will reach out immediately. 

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