Merchant cash advance stands for an alternative way of business financing. It’s not a loan itself. It bases on the credit card sales of a business and is similar to the cash advance. When a company needs money urgently, it can apply for MCA and get access to the advanced deposit. It’s a good alternative to the long approval process of the traditional loans.
Business cash advance companies work almost the same way as the traditional lending institutions. To estimate the risk of lending money, they check out daily credit card receipts. It gives an overall picture of the borrower’s creditworthiness.
The interest rates on the merchant cash advance loans are high. Depending on the company and borrower’s creditworthiness, they can be extremely high. They start with 15% and go higher depending on certain circumstances.
Speaking of the repayment process, it differs from the traditional one. Merchant cash advance companies withdraw some part of the daily credit card receipts. It’s a “holdback” that will last until the advance is paid off. The more transactions the business does, the faster the businessman will manage to pay off the advance.