Running out of cash can happen to anyone, even a business. Cash advance loans are not just for individuals; you can apply on behalf of your small business if you need cash fast. Let’s look at the facts surrounding these types of fast loans.

A merchant cash advance, also known as an MCA, provides another type of loan option besides the traditional small business loan. The MCA lender gives your company an upfront sum of money, and you, in turn, pay a percentage of credit and debit sales for the month.

Fluctuating payments mean the cost will change depending on your monthly sales. Varying payments can make knowing when you will pay off the loan more challenging, and some lenders have a fixed payment option. Your company can pay payment plans for merchant cash advance loans daily or weekly, depending on the loan contract. Repayment terms range from three to 18 months. Some repayment options deduct directly from your business’s bank account.

These types of loans come with their pros and cons. Here are a few.

Pros

• These loan types fund fast. You apply online, so approval is quick. Most of these loans will fund within 24 hours of application.
• Minimal Documentation is required to qualify most of the time, streamlining the process.
• MCA lenders have looser guidelines than most other loans. Bad credit may not be a deterrent for these loans.
• Lenders don’t require physical collateral like other loan types. 
• Your sales determine what your repayment amount will be. A percentage of your sales revenue determines your amount per day or week, which will fluctuate based on your monthly sales.

Cons

• Merchant cash loans can be expensive. Depending on the terms, you may end up with a high Annual Percentage Rate (APR). 
• These loans lack federal regulations. The MCA is considered a commercial transaction. The lack of laws surrounding a cash advance leads some lenders to prey on small businesses.
• Contracts for MCA loans prove confusing a lot of time. Due to the nature of the loan, you may not understand how the repayment schedule works or what the APR is on your loan. Some states have started regulating this loan type to combat lenders who prey on borrowers.

When looking for a merchant cash advance loan, do your due diligence and read all the terms and conditions to ensure that your business gets the best terms for these loans.