4 Benefits of Getting a Capital Advance
You may already know that a merchant capital advance (MCA) can be a valuable alternative to traditional business financing. But why should you consider an MCA instead of a working capital loan for fast cash? Here is how getting a capital advance can provide key benefits for your business.
How Does a Capital Advance Work?
A merchant capital advance works differently from a conventional loan. In a capital advance, a third party will purchase your company’s future profits.
You’ll receive these profits as a lump-sum payment, then repay the buyer through your future revenue. The amount of your advance is based on your historical performance and your revenue projections.
4 Benefits of a Merchant Capital Advance
A capital advance comes with four distinct features that can make it a better option than a small business loan, including:
1. Fast Cash
The most immediate benefit is that an MCA will provide your business with an instant influx of cash flow. You can use this cash for any business expense that you see fit, whether that means handling your day-to-day operational expenses and payroll or using the money to seize an opportunity to invest in your business.
An MCA can be used to purchase new equipment, replenish your inventory, or make other improvements to your small business. And because the lending process is so quick, you can equip your business with more agility to take advantage of new opportunities faster than if you’d used a traditional loan.
2. Less Business Risk
Many business lenders will only provide you with a loan if you offer something as collateral, such as business equipment or even your property itself. The danger, of course, is that you could risk losing these assets if you don’t repay the loan.
An MCA requires no collateral, which means that you can face less risk when securing this type of funding. Additionally, since capital advances are not classified as loans, you won’t have to worry about impacting your business credit score if you miss a payment deadline.
3. Flexible Repayment Terms
When you secure a cash advance, you’ll make repayments from your future revenue. But you’ll generally have flexibility in terms of the amount of each monthly payment, as well as the schedule for paying off the advance.
However, the exact terms vary by the third-party MCA provider, so always check the terms before you commit. Compare at least three providers to ensure that you find the best rates for your business.
4. No Credit Check
Typically, a business loan will require a credit check, and the terms of your loan — including the amount and interest rate — will depend on your credit score. That’s bad news for newer businesses without the business history to register a strong credit score.
A capital advance requires no credit check, making an MCA a solid financing option for entrepreneurs with low or no business credit. No credit check also means that your application can be processed quickly, giving you faster access to cash.
Optimize Your Cash Flow
MCAs can be vital tools for businesses needing flexible, fast cash. Business leaders can also combine strategies to save money. For instance, a dual pricing/surcharging program like Simpay Select Plus can allow you to save money on credit card fees.
With the right combination of strategies, you can find yourself better positioned to optimize your cash flow.
