What is a Merchant Cash Advance & Is It Right for Your Business?

Last Updated on July 25, 2017

A merchant cash advance is an innovative business financing option that is growing in popularity, especially among small and mid-sized businesses in the retail space.

The first thing to note is that, essentially, a merchant cash advance isn’t a loan. Rather, it’s an on future payment card sales — e.g. debit cards and credit cards. Here’s how it works:

A lender advances you an agreed upon amount of funds, which you can use to purchase stock, add new technology, hire staff, cover renovations, and so on. At the end of each business day, your credit and payment card sales are added up, and a small fixed percentage is transferred to the lender to pay back the loan (which again is technically an advance, but we’ll call it a loan going forward since for all intents and purposes, it does the same thing that a loan does: boost your available working capital). Note also that this daily calculation and repayment happens automatically, which means you aren’t bogged down with yet another administrative task.  

As you can see, when you have a day with strong above-average sales, a little more is paid back towards your loan. This is obviously good news, since you’ll be that much closer to full repayment. On the other hand, on days when sales are sluggish and below-average, you’ll pay a bit less towards the loan. This leaves more cash-on-hand for you to invest in revenue-generating strategies and tactics, such as running promotions, advertising, extending business hours, adding a product line (or if you’re a restaurant owner, new dishes), and so on. Throughout your loan period, you can log into an online dashboard and see precisely how much you’ve borrowed, how much you’ve paid back (daily as well as aggregate), and how much loan balance is remaining.  

Now that you know the basics of a merchant cash advance, you may be wondering if this funding option is right for your business. Generally speaking, it may indeed be a viable and beneficial option if:

  • The majority of your transactions are via payment card (since as noted above, payment card sales determine the amount you’ll pay back each business day).
  • You have an immediate use for the funds instead of wanting to have funds on hand if/when you need them (if this is the case, then a business line of credit is a better option).
  • You have a relatively short-term expense or investment to cover (i.e. less than a year).

Learn More

To learn more about a merchant cash advance and see if it’s right for your business, contact National Business Capital today. As always, your consultation with us is free and we’re available to you 24/7/365.
Or if you’re ready right not to move ahead, start your online application right now. It takes about 2 minutes, and we’ll provide you with an approval decision within one day. Also keep in mind that we do not require collateral, and it’s fine if you have impaired or bad credit.  

National Business Capital & Services is the #1 FinTech marketplace offering small business loans and services. Harnessing the power of smart technology and even smarter people, we’ve streamlined the approval process to secure over $1 billion in financing for small business owners to date.

Our expert Business Financing Advisors work within our 75+ Lender Marketplace in real time to give you easy access to the best low-interest SBA loans, short and long-term loans and business lines of credit, as well as a full suite of revenue-driving business services.

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About the Author, Megan Capobianco

Megan is passionate about helping business owners along their journey - providing them with relevant content they can use in their day-to-day operations.

Disclaimer: The information and insights in this article are provided for informational purposes only, and do not constitute financial, legal, tax, business or personal advise from National Business Capital & Services and the author. Do no rely on this information as advice and please consult with your financial advisor, accountant and/or attorney before making any decisions. If you rely solely in this information it is at your own risk. The information is true and accurate to the best of our knowledge, but there maybe errors, omissions, or mistakes.