Merchant cash advance loans are getting popular day by day and shattered all over the marketplace. This loan is all about selling the future revenues of the business to obtain money in advance. The cost of this financing tool is an important thing as the payback is 1.2 to 1.4 of the amount obtained over a small period which is 3 to 12 months. The lender needs direct access to the business bank account and/or credit card receipts. The lender can also be defined as the “Buyer” or “Buyer of Future Revenues”. They have the initial right to the receipts and collects of the business daily or weekly that leaves the entrepreneur with a lack of control over their cash flow. The sequence like underwriting, approval, and funding usually takes only 2 to 5 business days. Hence you can access the money easily and quickly.

merchant cash advance

Let us know more about the rate of merchant cash advance loans with a small example. If an entrepreneur sells $12,000 of future revenues for $10000 today and his payback is $12000 over three months, it is a 20% premium. Simple annualized interest will make this an interest rate of 80%. The amount of funding is $2000 on $10000 as it is paid back in three months.

Merchant cash advance loans are not actually designed as a loan because it is a purchase of future revenues which is why usury laws are not applicable. Moreover, this is a transaction of a business and it is not safeguarded by consumer law. When the risk of loss exceeds the cost of funding, this transaction is only beneficial to the business owner and they are 110% sure about the money for repayment.

merchant holding cash advance

Business owners must not utilize this funding tool to retire other debt, on the prospect of future expansion, or to buy an expensive piece of equipment. There exist various other financing tools which are more appropriate for those scenarios. There are many businesses who take out two to three MCA loans and share their views with other business owners so that they can make better financial decisions. On the internet, you can search out various financing solutions to meet your business needs. Experts are also available if you need any financial advice and options for your business. So must take the right decision for the financial need of your business.