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Merchant Cash Advance Explained
A Merchant cash advance is basically a small, quick and easy to access loan that requires little paperwork, and is forgiving of bad credit, because of how it works.
How MCAs works:
A financial provider connects to your merchant account, provides you the loan, then repayment is made automatically by:
- It’s a short-term loan, which means the loan must be repaid within 3-12 months depending on the provider
- Repayments can be made daily, weekly or monthly depending on your provider.
- Repayments are most commonly made as a percentage of sales, but can be a flat rate
The financial of MCAs:
- Depending on the volume of your transactions, you can expect up to a full months average card sales
- Merchant cash advances have factor rates ranging from 1.1-1.3
- The interest rate of a MCA is called a factor rate and is determined by a number of things (check FAQ for more info)
- MCA’s have flexible repayment that works with your cash flow cycle.
How it works
- You apply with us
- We review your application
- We match you with a lender
- You enjoy your renewed cash flow
The documents you need to apply
For quick indicative pricing:
- 12 months merchant statements
- 3 months business bank statements
Working with Amplified Startups
Amplified Startups is a team of finance experts with years of experience, and a vast network of financing providers. Firstly, we present you with every financing option on the table available to your business, and secondly, we use our financial expertise to help you figure out what financing option suits your business best at this time. Our work isn’t done until your business grows.
To start growing, sign up with us, tell us what your business needs, and we’ll do the rest.
Frequently asked questions
A merchant cash advance works by providing the business with the short term capital it needs in return for a portion of the business’s future revenue receivables at a discounted price. The financing firm receives a certain percentage of the business’s future accounts receivables. The percentage is based on a number of factors and is called a factor rate (see our factor rate FAQ)
Fast and flexible capital. If your business needs cash fast and with few strings attached, merchant cash advances are a perfect, if pricier, solution than traditional loans for you. Payment options are also more flexible in cash advances, and can perfectly complement businesses with variable revenue, such as seasonal businesses, or businesses that see increases in revenue in certain periods.
The factor rate is effectively the interest rate of the MCA. The difference however is that factor rates are not variable, they are set at the cents per euro or pound borrowed. If €1 is borrowed at a factor rate of 1.4, €1.40 will be repaid. To figure out what you have to repay, multiply the factor rate by the amount you borrowed.
What determines the factor rate is:
- Your credit history
- Your sales volume
- How long your business has been trading
Any business with account receivables in the form of credit or debit card sales, invoices and etc. After application, the finance provider will review credit/debit card processing statements and invoices, and approve the cash advance.
In addition to that, these following documents are typically needed to apply:
Identity Validation
- ID
- Passport
- Driving License
Business Bank account number and routing number for deposit
Last three months of business bank statements
Last three credit card processing statements
Credit is a factor when a finance provider decides whether to approve a cash advance. However, compared to other loans, it is a much smaller factor, as merchant cash advances are much more concerned with the overall performance of the business, and particularly, the volume of credit/debit card transactions, business revenue, time in business, accounts receivables, and business credit history.
Typically the period ranges from 3-12 months. The repayment period will be specified in the contract with your provider.
A merchant cash advance is a purchase and sale transaction. Here, a financing company is purchasing, at a discount, a portion of the small business’s future revenue stream. In contrast, a small business loan is when a financing company lends money to a borrower and the borrower must repay the small business loan with fixed payments.