What Are the Pros and Cons of a Merchant Cash Advance?

A merchant cash advance (MCA) offers quick access to capital for businesses, but it’s important to weigh the benefits and drawbacks. The pros include flexible repayment terms and easy approval, while cons can include higher costs compared to traditional loans. In this article, we will explain both sides in detail and help you determine if an MCA is right for your business.

A merchant cash advance provides businesses with an upfront lump sum in exchange for a percentage of future credit and debit card sales. This form of financing is especially popular with businesses that process a high volume of card payments, such as retail stores, restaurants, and service-based companies.

Unlike a traditional loan with fixed monthly repayments, MCA repayments fluctuate according to sales volume. As sales increase, repayments rise; when sales slow down, repayments decrease.

One of the major advantages of an MCA is the speed at which you can access the funds. The approval process is typically faster than that of a bank loan, sometimes taking as little as 24 to 48 hours. This is ideal for businesses that need cash quickly for things like inventory restocking, equipment purchases, or emergency expenses.

Repayments are tied to a percentage of your daily card sales, so you only pay more when your business is making more. If your business experiences a slow period, your repayments will naturally decrease. This flexibility allows you to better manage cash flow during periods of lower revenue.

Unlike traditional loans that come with a set repayment period, MCAs don’t have a fixed end date. Repayments are entirely dependent on your sales, meaning there’s no deadline or pressure to meet a specific monthly payment. This can provide peace of mind for business owners with fluctuating income.

Because MCAs are based on your business’s future sales, they are easier to qualify for compared to traditional bank loans. Even businesses with poor credit history may still be eligible for an MCA. The primary qualification is having a steady stream of card sales.

Determining whether an MCA is the right option depends largely on your business needs and cash flow. If your business regularly processes card payments and you need fast, flexible funding, an MCA could be a valuable tool. However, if you’re concerned about the higher costs or the impact on daily cash flow, it’s worth considering other forms of business financing.

At FUNDUR, we understand that each business is unique. We offer expert advice to help you weigh your options and find the right funding solution. Whether it’s a merchant cash advance or another product, we’re here to help. For more information, get in touch with us today. Call us on 01908 732020  or complete our online contact form. 

The amount you can borrow through an MCA typically depends on your average monthly card sales. Most providers offer advances ranging from 50% to 150% of your monthly sales volume.

Repayments are based on a percentage of your daily card transactions. The repayment amount fluctuates in line with your sales volume, ensuring you’re not overburdened during slower periods.

The time frame for securing equipment financing can vary, but with the help of FUNDUR, businesses can often receive funding within days, depending on the lender and the complexity of the financing request.

Technically, no. A merchant cash advance is not a traditional loan but rather an advance on future sales. You receive a lump sum upfront, and the provider is repaid through a portion of your future card transactions.

MCAs are most commonly used by industries with high card sales volumes, such as retail, hospitality, and service-based businesses like salons and repair shops.

Yes, MCAs are often available to businesses with poor credit. Since approval is based more on your business’s card sales history than on your credit score, even those with less-than-perfect credit may qualify.

At FUNDUR, we specialise in providing businesses with a range of funding solutions, including merchant cash advances. We work closely with trusted providers to ensure you have access to the best possible options for your business needs. Whether you’re looking for fast funding or more flexible repayment options, we can guide you through the process and help secure the right financial solution.

To learn more about how we can help your business grow, get in touch with FUNDUR today through our online contact form or call us on   01908 732020 .