The Ultimate Guide to Merchant Cash Advances

How do Merchant Cash Advances work? 

This Ultimate Guide to Merchant Cash Advances from United Funding Group covers everything you need to know about rates, payments, and timelines for this business financing option. If you have any questions about Merchant Cash Advances after reading this Ultimate Guide, please contact us! We’d be happy to help you find the best financing option for your business!

Merchant Cash Advance Vs. Business Line of Credit

The two business financing options are fairly similar, but they have their pros and cons. A Merchant Cash Advance (MCA) is a non-recourse loan that’s funded from your credit card transactions. A Business Line of Credit (BLOC) has more flexible terms for when you pay back funds, but it also comes with significantly higher payments.

Understanding How Fees Work

When you receive a merchant cash advance, there are generally three separate fees that come with it: A finder’s fee (sometimes known as a broker fee), an origination fee, and interest. The way in which these fees work depends on whether or not you have a line of credit associated with your account and what type of transaction is being made. There are two main types of loans for MCA’s: Revolving & Non-Revolving lines of credit. You may choose either one depending on your individual needs. 

Transparency in the MCA Process

Business owners want to know all about their options and what it will cost them when financing a business. To ensure that you’re making an informed decision, make sure you find a lender who is willing to be transparent throughout your entire transaction, including interest rates, fees and payment schedules. Lenders like United Funding Group are committed to transparency through every step of their MCA process. Contact us today if you’d like more information on rates, payments and timelines associated with our services!

Funding Within One Business Day

A merchant cash advance is a method of business funding that offers access to capital within one business day. Because traditional financing is often tedious and time-consuming, merchants are turning to merchant cash advances (MCA) as an alternative method of financing.

What Kinds of Businesses Qualify?

Any business operating in North America with low-to-excellent credit rating can qualify for a merchant cash advance. UFG partners with companies in a variety of industries, including: insurance and property management, healthcare, hospitality and dining, IT services, and retail. If you don’t see your industry listed above but you’re still interested in learning more about merchant cash advances, contact us directly at (954) 287-4539 to learn more about what types of businesses qualify.

Understanding Rates & Repayment Terms

Understanding rates and repayment terms is one of the most important steps in getting a Merchant Cash Advance. Rates for MCA’s will vary significantly from one provider to another; getting a 10% loan from one provider is far different than taking out a 10% loan from another. Look into repayment terms as well – if you can take out a $50,000 loan at 5%, but your payments are $5,000 per month, that would be more expensive than taking out a $25,000 loan at 15%. Pay close attention to rates and terms when comparing different providers so you can find an MCA that best fits your needs. That being said, it’s common practice for businesses to borrow between 80-120% of their monthly credit card sales (and note: credit card sales isn’t synonymous with income—it doesn’t include cash purchases). This means that successful businesses will usually carry a balance equal to 20-60% of their overall annual revenue. 

Scheduling Payments by Pre-Authorized Debit (PAD)

Unlike loans and credit cards, merchant cash advances make scheduled payments by pre-authorized debit. Scheduled payments help merchants manage their cash flow more efficiently because they don’t have to worry about forgetting a due date or avoiding paying a payment fee. In addition, PADs allow merchants to request amounts less than $10,000; credit card transactions can have limits as low as $500. Just like every other form of business financing, merchant cash advances aren’t one-size-fits-all and should be customized based on your business needs.

Do I Need Additional Finance Options? Contact United Funding Group to Learn More!

To many small business owners, a traditional loan from a bank or credit union is an appealing way to get access to capital. But in some cases, those loans might not be available or may not come with an attractive enough interest rate. Consider another option: merchant cash advances (MCAs). These specialized financing options allow you to borrow money from a third-party lender—one that works with businesses in your industry—and you repay it through your daily sales proceeds. You can take out multiple MCAs for several different purposes, and each one will come with its own set of terms and conditions.

For more information or answers to any questions, you may have, contact United Funding Group today!