Since I recently wrote an article covering the disadvantages of a Merchant Cash Advance, I feel it’s only fair to play devil’s advocate and list the benefits to an MCA.
And… when an MCA might be the right option for you, especially if you’ve exhausted all other options and are at a point of no return.
Some of the advantages worthy of being noted regarding an MCA business loan are:
- They’re fast – you can have cash in your hand or account within one day! This can be a huge relief to those that are in a situation with bad credit after being denied for all other loan types. This is probably the main selling point on an MCA, and this can cover an unexpected business expense or if you were behind on payroll, for example.
- It’s easy – An MCA is meant to be a straightforward process (mostly because they don’t care who you are or how eligible you are. It will only require documentation such as bank statements, credit card statements, and tax return information. It can be done online from the comfort of home.
- You can have bad credit – They don’t care how good your credit is, how consistent you’ve been in payments, how much of a liability you are, etc. Because more than likely, the MCA will be a bigger liability anyways.
- No Collateral – Many loan officers require an insurance policy of some kind to secure the loan. This means you may have to put your mortgage, home, or car into the pot to get a loan. Not an MCA. You get to keep your house and have the money too!
- High Limits – You can take out a loan for up to $2 million. Of course, that amount will be more of a process and only given to large businesses, but it can be a huge sum of money delivered at a rapid speed, which could ultimately save the day.
An MCA may work best for you if:
- You are a well-established business with a lot of cash flow that will be able to pay it off quickly.
- You are a brand-new business that doesn’t have enough credit built up to get another loan type and want to build a credit history.
- Your revenue is somewhat sporadic or unpredictable.
- You’ve exhausted all other loan options.
To Qualify for An MCA
If this is the option you are still leaning towards, here are the requirements to be eligible:
- Sales or revenue of at least $3,000 a month
- A credit score of at least 500
- Proof of being a legitimate business for at least three months
- A credit card company that works with an MCA loan (as some credit card companies won’t be feasible with an MCA or allow them to take the daily charges. If your card company doesn’t allow this, the MCA can’t be approved, or you’ll need to find a credit card company that does sync with a specific MCA company.)
Will You Take Out an MCA?
With APR rates reaching triple digits – this seems like reason enough to steer clear of these high-risk advances. You won’t get any rewards for paying it off early and can end up in a dangerous cycle of MCA paying off MCA until you’re so deep that can’t see the sunlight anymore. Proceed with caution.