At Belkin, we pride ourselves on having a marketplace that can help out all different sorts of business owners. If you don’t have the time to wait for a typical loan or wouldn’t qualify, a merchant cash advance might be for you.
We’ve said it over and over: A merchant cash advance can be very expensive. And based on the structure, taking on an MCA can really take a chunk out of your cash flow.
But let’s look at how you can calculate the actual cost of a merchant cash advance.
How would you like a cash advance—approved and funded in just a day or two—with almost no paperwork involved?
That’s what a merchant cash advance is, with one caveat:
In return for that lump sum advance, you agree to pay the lender back with a percentage of your daily credit card sales. For this reason, MCAs typically make sense for businesses that get most of their revenue from credit card and debit card sales (but you don’t have to get all your revenue this way in order to qualify for a merchant cash advance).
How does it work in practice?
Well, with most types of MCAs, a provider will offer you a lump sum of cash in exchange for a slice of your daily credit card and debit card sales. Typically the MCA is paid back by remitting that percentage of your sales from your bank account—through ACH (Automated Clearing House) withdrawals. As merchant cash advance providers can just plug into your bank account or credit card processor, they can be easy-to-access, quick products.
While a merchant cash advance is definitely one of the faster financing options out there, it is the most expensive loan on the market.