LOANS

"LOANS"

SPOILER ALERT - THEY'RE NOT LOANS!!!

Another Blue Coin Production

From The Folks At

BestBusinessLoans.com

MCA

FAQ

Q.

What is an MCA business loan?

A.

A "merchant cash advance" (MCA) is a type of financing that provides a lump sum of cash upfront to a business in exchange for a pre-determined amount of its future revenue. MCAs may be available same-day, and are typically offered by alternative & private lenders. MCAs and generally do not require collateral or high credit scores, making them a popular choice for small businesses with limited assets, time-sensitive opportunities for the deployment of working capital, or an owner with a less-than-perfect credit score. MCAs hardly weigh personal credit scores in the underwriting (decision-making) process- Thats is, when compared with the weight that a personal credit score has in most other forms of credit extension.

Repayment of an MCA was historically done through a holdback percentage of the business's daily credit card sales. This specific deal structure is rare today,with most "MCAs" being repayed via micropayments made per weekday. This means that a business doesn't actually need a merchant account, collateral or a high credit score to secure an MCA.

MCAs are known for their quick application and approval process, with funds typically available to the borrower within days of application. However, MCAs may come with high "interest rates" and fees, and their repayment structure can make it difficult for some businesses to manage cash flow. As such, businesses considering an MCA should carefully review the terms and conditions of the repayment structure before taking on any type of business financing.

It's important to note that a merchant cash advance (MCA) is not considered a loan, but rather a sale of future receivables. This distinction is important because it means that an MCA is not subject to the same regulations as traditional loans.

Instead of loaning the borrower a fixed amount of money that is repaid over time with interest, an MCA provider purchases a portion of the borrower's future revenue at a discounted rate. The borrower then repays the MCA through future sales until the MCA is fully repaid.

This distinction is significant because it means that MCAs are not required to disclose an annual percentage rate (APR) or adhere to other regulations that traditional lenders must follow. As a result, the total cost of borrowing for an MCA may be significantly higher than it appears at first glance. For better or worse, regardless of credit score; MCAs are often the only prudent, viable option for certain working capital requirements.

Business owners considering an MCA should carefully review the terms and conditions of the "loan" and ensure that they understand the total cost of borrowing before taking on this type of financing. It may be helpful to work with a financial advisor or consultant to compare the cost of an MCA to other financing options and determine the best course of action for their business.