Request a merchant cash advance
What is a merchant cash advance? A Merchant Cash Advance (MCA) is not a loan, but an introduction to prepayments based on the credit card transaction history — we usually refer to it as a cash advance. You will get a reward from your credit card provider, which will be repaid using a percentage discount off your consumer payments via credit card on a daily or weekly basis.
The cost you will pay back is determined by the factor level. Multiplier levels will vary but are usually in the range of 1.1x to 1.5x. The amount of funds you have to pay is a factor level multiplied by your loan amount. On a regular basis, your credit card provider will collect deferred funds (holdback rate: the number of funds held until you fulfill their repayment obligations).
For example: if the advance you receive has a holdback rate of 10%, then the credit card provider will receive 10% of the transactions entered into your credit card every day (or week) until the payment is paid off. This deferral rate varies – the average ranges from 10-20%, but some providers range from 8% to 30%.
Business advances are a good choice for businesses that need short-term financing tools, such as unexpected costs, inventory purchases, cash flow gaps due to seasonal fluctuations and marketing activities.
Is the down payment withdrawal right for my business?
The following are general requirements that can help you assess whether the down payment is suitable for your business:
You receive most credit card payments: Businesses that accept most credit card payments are very suitable for applying for advances for business people, such as: restaurants, retail businesses, and beauty salons.
You run a seasonal business: Your payment is based on your daily or weekly credit card receipt. This can be an advantage for seasonal businesses because paying off smaller amounts during quiet business periods will help reduce the pressure on your cash flow.
You need fast funding: Compared to the complicated submission process by traditional banks and lenders, advance providers can approve your application within a few hours, and can provide funding within a few days. This loan is a good choice if the financing is needed, such as when unexpected expenses arise or when you need funds to take advantage of certain business opportunities.
You are not eligible to apply for a traditional loan: The cash advance provider is very concerned about the volume and consistency of your sales, so it has more stringent criteria than traditional lenders. In general, collateral is not needed and credit checks are not carried out. Therefore, merchant cash advance can be a viable option for small businesses or newly established businesses without an established credit history, or businesses that do not meet traditional loan criteria.
Some tips to help you prepare for a merchant cash advance application
Ask for a weekly repayment (holdback rate)
Some companies only provide daily repayments, but there are certain companies that offer alternative payment schedules. Cash advance is one of the most expensive forms of small business financing, because a daily payment schedule can put pressure on cash flow on your business. Therefore, you should choose weekly payments if possible.
Use this type of financing at the right time
If you have just started receiving payments via credit card from your customers, or are a newly established business, then submit a cash advance application when your credit card payment history has been built more strongly. In this way, you will have a better chance of obtaining approval or obtaining favorable payment terms.
Don’t get caught in debt
Advance withdrawals result in large fees and costs. Your business can pay an annual percentage rate (APR) that increases to a three-digit amount, depending on the cost and length of time to pay off the debt. Some things can get out of control quickly if business owners cannot pay off their payments — and often, they end up taking many cash advances in sequence just to pay off debts from the previous cash advance.
Entrepreneur Joe Ruvacalba is an example. A CNN Business article shows that Ruvacalba has taken five cash advances for its pipeline company at a point in time and made daily payments of around $ 5,000 (± Rp. 70,000,000). He suggested: “As an owner, you have to ask yourself: ‘Can I handle this payment in full every day?’ And if you can’t, don’t use this option. “
What are the small business financing options that I can try?
Cash advance may be one of the few options for small business owners who do not meet the requirements for traditional loans. But with the emergence of alternative lenders, small business owners have more choices of external financing solutions — including short-term loans, invoice financing and credit lines.
With Harrison, the loan application process is easy, light and fast. Delivery of applications only takes a few minutes and you will be notified of the status of your loan agreement in just 24 hours.