Credit Card Cash Advances
Credit Card MCAs simply deduct a specified percentage of a business’s daily processing transactions until the loan amount, plus specified interest, is paid in full. Given the volume-based nature of a cash advance repayment schedule, this process can go quickly, or slowly, depending on the company’s revenue. It’s important to note that, given the fixed interest of a cash advance, the length of repayment does not affect the amount required to be repaid, thus making this a flexible option that does not punish the merchant for the common ebbs and flows in revenue that every business experiences over its lifetime.
ACH Cash Advances
An ACH MCA involves an agreement between the merchant and the cash advance provider, wherein the provider defines terms of repayment; payments are automatically deducted from the merchant’s bank account on a fixed schedule. While having more in common with a traditional bank loan, ACH cash advances still share the major benefits of other cash advance types; including more reasonable borrowing requirements, loan amounts that are based on your revenue and not your credit viability, and a fixed repayment cost that is far more forgiving than the accruing interest of a bank loan.
Due to the repayment options provided by the cash advance industry, merchants that were unqualified for traditional bank loans are able to take advantage of business funding.
Asset-based Cash Advances
Asset MCAs attach a lien to an asset, like a piece of equipment, or a fixed portion of inventory. This gives the provider a risk-free method for seeking repayment in the event the lender cannot collect that repayment from the business owner. This is considered a secure MCA, and although it places some pressure on the business owner if repayment cannot be made, it is also considered a more flexible option for businesses that can experience severe downturns in revenue.
Real Estate Cash Advances
Real Estate MCA’s are also considered a secure cash advance, wherein a provider gains the rights to an asset in front of the holder of that asset. This repayment process provides the lender additional guarantees, while giving the borrower the ability to pay back the lender in a specified timeframe.
Cash advance is a growing market and is quickly becoming the preferred method for acquiring working capital, with current methodologies in repayment requirements giving business owners numerous and varied options that are suited to their specific businesses, rather than the one-size-fits-all repayment schedule of traditional bank loans.