Give Your Business A Leg-up With A Merchant Cash Advance

March 3, 2023 | Merchants | Dustin

Let’s face it, not every successful business has a team of angel investors to help bankroll the launch of their business. If you’re one of the many that don’t have the privilege of living in Silicon Valley, you may struggle to find investment options. The good news is, there are many banks willing to supply upfront cash to qualified businesses. Let’s explore the exciting world of merchant cash advances (MCAs), aka ACH merchant cash advances.

What is a Merchant Cash Advance?

The name is simple enough to break down, merchant cash advances are a form of instant business financing in the form of a cash injection. Many merchants may pause when they hear the “advance” part, because of the bad reputation the payday advancement industry gives it.

Although they are similar to loans, they are typically acquired quicker and with less paperwork than a traditional business loan. Also, as a business owner, you don’t need to put any assets up as collateral. Bad credit? No credit? No problem! A business owner’s credit doesn’t factor in with a merchant cash advance.

How Does a Merchant Cash Advance Work?

So, if a merchant cash advance isn’t a loan, doesn’t require collateral, or even that the business owner has good credit, how exactly do they work and how can you determine if they are right for your high risk business needs?

The amount determined by the financing provider for a merchant cash advance is based on your business’ daily credit card processing sales. If your business processes enough on a daily basis, the MCA provider would most likely be willing to fork over some cash immediately.

After you accept the terms of a merchant cash advance, your MCA provider will then be entitled to a percentage of your daily payment processing sales. If you operate in the eCommerce sector, and most of your sales come from credit card transactions. These future transactions help pay back your MCA at a quicker rate.

Merchant Cash Advance Fees and Repayment Rates

The total fees and repayment amount of a merchant cash advance are determined by the factor rate. Depending on your industry, the factor rate usually ranges from 1.1 to 1.5. For example, you want an MCA of f $60,000 and your rate is factor is 1.3. You multiply your total advance by your factoring rate and you will get your total repayment amount of $78,000. Subtract your total repayment amount by your total advance amount. This gives you an idea of what the total fees amount to for your merchant cash advance ($18,000).

How to Apply for Your Merchant Cash Advance

If you’re in need of a merchant cash advance, you are in the right play. At PayKings, we offer a plethora of merchant services, including merchant cash advances. To apply all you need to do is fill out a PayKings merchant application. One of our payment processing experts will be in touch with you as soon as possible.

To determine your factor rate, we will need to know a few details about your business’ credit card processing history. You will need to have some documents for your credit card processing statements. These include merchant account statements, your total years in business, and your most recent business tax return. Once you submit all the required documents, you can expect a speedy agreement within a few days.