For most of the small-scale business owners, there comes a time when they need business capital urgently to help run or sustain their business. There may be many reasons behind it. Sometimes the business owners need it to pay the employees on time for which they might not have sufficient funds, or they might need it so that they could take on an opportunity that might be in front of them so they could capitalize on it.
A person should also know what MCA is. MCA is short for Merchant Cash Advance. Its an advance and a small business can ask for MCA and apply for it. An advance will be deposited in the business’s account at a much faster pace.
Reasons that businesses need capital
Here are some of the ideas that a small-scale industry may need money:
Similar to how you keep an emergency fund for your personal life, you need one for your professional one also. This fund will come handy in unexpected or unforeseen situations like a lawsuit, or if the best-paying customer suddenly leaves. Even if there are enough funds to deal with a situation like that, it always helps to have a backup.
A lot of the times, businesses begin to do well for what they are making but, they don’t do well enough to be able to the take the company to the next level. If they had a chunk of business capital that they could use, it would go a long way in trying to take the business to the next level. A person can also apply for an MCA when he or she needs any funds for marketing.
Recession or downtime
- Every company has been through some downtime or recession once or maybe more than that, especially the kind of the companies that run on a seasonal basis. The market may be very successful when the season arrives, but in non-season, it often becomes tough to keep the business functioning, which is when having business capital would come in handy. Debt obligations
Short-Term Debt is growing more of an operational standard as time progresses for some different companies. Having access to business capital could save the business from possibly going down under.
Peace of mind
Running a business is not an easy job. It often becomes a hand-to-mouth situation. Although there are no limits that a company could rise to, there is also no telling when the company could go out of business. Having some business capital would allow the owners to put their feet up for a bit and not stress over what is to come and what could happen. To ensure that a business person has a peace of mind, he or she can apply for MCA, and get an approved application ranging from few hours to some days.
These are some of the reasons that companies may need business capital. Some of the ideas are relatively common whereas others depend a lot on the situation.
Difference between a Merchant Cash Advance and a loan
A lot of the people are confused nowadays regarding the difference between a loan and MCA. Now, that we know what a Merchant Cash Advance is, we will see what kind of loans are there.
The traditional types of loans are referred to the loans that come through banks. Banks give the traditional style of loans because it has been around for centuries. It is more familiar with the ins and outs of how the loan and the business capital works.
The main point of a Long-term loan is that a person gets more time to pay the loan back. In most cases, the period starts from five years and goes up to ten years or even more than that. It is harder to get a long-term loan approved because of the elaborate and strict standards of qualifying that they have.
This is best suited for business owners that are small-scale. Short-term loans are best at providing immediate funds on a smaller scale. They also have a higher interest paying rate than others. The payback time for a short-term loan can vary from a couple of months to a few years at most. They may also require a person to put up collateral especially if he or she are taking the loan through a bank.
Then there comes Merchant Cash Advance, which is more new than old. It is often called the modern way of raising business capital.
Merchant Cash Advance
The first thing that we need to understand about Merchant Cash Advance is that it is not a loan. One could say that it is an advance payment that is made for the credit card sales that the company is going to make in the future. It is best suited for a small-scale business. The whole concept of Merchant Cash Advance came into existence just a few years ago. However, in that short span of time, it has managed to become quite popular with the leisure sector and retail businesses as well.
How to apply for a Merchant Cash Advance
One of the reasons that Merchant Cash Advance is so popular is because of how fast and easy the whole process is. Since MCA’s are paid depending on the credit card sales that the company makes, the MCA company looks at the credit card statements to analyze and decide whether you get enough volume for the business to run sufficiently and make a profit or not. Some Merchant Cash Advance companies will ask for the bank statements as well as the credit score.
Another positive feature about Merchant Cash Advance that many people are not familiar with is that most of the applications for it are available online. Some companies are way faster than others when it comes to approving the loans, and it is often done in under a day’s time.
A Merchant Cash Advance is a relatively new way of getting business capital for the company than the more traditional ways like going to the bank. However, it comes down to the individual and the requirements of the company that decides which would be a better option. However, most of the time, after the research is done between the different types of business capital, MCA comes out as the clear winner. One of the reasons for this is how fast the capital is passed.