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Is a Merchant Cash Advance Right for Your Business?

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How merchant cash advances work

A merchant cash advance has historically been for businesses whose revenue comes primarily from credit and debit card sales, such as restaurants or retail shops. Now, merchant cash advances are available to other businesses that don’t rely heavily on credit card or debit card sales. Merchant cash advance financing product is not technically a loan. A merchant cash advance provider gives you an upfront sum of cash in exchange for a percentage of your future sales.

Merchant cash advance repayments can be structured in two ways.

You can get an upfront sum of cash in exchange for a percentage of your future credit and debit card sales, or
you can get upfront cash that is repaid by remitting fixed daily or weekly debits from your bank account, known as
ACH, for Automated Clearing House, withdrawals.

This option has become the most common type of merchant cash advance. They’re referred to as ACH merchant cash advances and allow providers to market to businesses that aren’t primarily tied to credit and debit card sales.

Instead of making one fixed payment every month from a bank account over a set repayment period, with a merchant cash advance you make daily or weekly payments, plus fees, until the advance is paid in full.

How much you’ll pay in fees is determined by your ability to repay the merchant cash advance. The merchant cash advance provider determines a factor rate based on its risk assessment.

Why borrowers opt for MCAs

Merchant cash advances do have their pluses:

  • They’re quick. You can often get an MCA within a week or so with no heavy paperwork. Providers look at a business’s daily credit card receipts to determine if the owner can repay.
  • You won’t lose your home. MCAs are unsecured, so you don’t need collateral. This means you don’t have to forfeit any personal or business assets if your sales plunge and you fail to repay.
  • “When sales are down, your payment may be too. When the repayment schedule is based on a fixed percentage of your sales, repayments adjust based on how well your business is doing.

Kashually can answer all your questions, and guide you towards the best options for you. Contact us now or call 833-527-4123

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