Using MCAs To Grow Your Small Business

Using MCAs To GrowYourBusiness

It’s fairly common knowledge that merchant cash advances (MCAs) can be used to as short-term working capital to get new businesses through lean periods. After all, MCAs can be arranged quickly, and can do many things traditional bank loans cannot. But MCAs can be used to advance small businesses that are poised for growth, as well.

Merchant Cash Advances Were Once Looked Down Upon

It’s true. There was a time when a small business would only request a merchant cash advance if they were having money problems and deeply in debt. Banks even got to the point where they declined applications because the risk was too high. Since then, that stigma has washed away, and commercial finance professionals have noted how a small business grows and becomes much more profitable after the boost in capital from a merchant cash advance.

MCAs Have No Intended Destination

Most traditional bank loans are marked for specific things, such as construction, inventory, staffing, etc. MCAs, on the other hand can be used for any or all of those things, including advertising campaigns, covering payroll, completing internal projects, or rolling out new products and services. There are no restrictions on how the funds are used, which allows small business owners to portion out capital as they see fit.

MCAs Are Not Loans

MCAs are considered sales on future receivables, as opposed to debt financing. This is because they are repaid as a percentage of each credit card transactions customers make with your business. Additionally, merchant cash advances have no prepayment penalties, in case of a heavy sales period. Contrast this with traditional loans, which levy penalty fees against a small business that wants to repay the debt ahead of schedule.

MCAs For Growth

A small business will usually take out an MCA in anticipation of a large sale sales period, or rolling out a new product line. The funds go toward stocking inventory, hiring additional staff, marketing, and the like. Once customers start making purchases, the MCA is paid off quickly, and the revenue left over can be used to take the small business to the next stage of development.

What Types of Businesses Use MCAs?

Merchant cash advances were originally thought of a “dire straits” financing for small businesses with cashflow problems. Since then, small business models ranging from niche startups to online stores, healthcare facilities, IT firms, and even manufacturing companies are using MCAs to position themselves for growth. If your small business is able to accept credit cards from customers, then it is well on the path to qualifying for an MCA.


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