In this case it’s worth us starting with the question exactly what is a business cash advance? In proper finance lingo, a business cash advance should come in the form of either a Merchant Cash Advance or Invoice Factoring. Most of the time you’ll normally find the term business cash advance is just intertwined with the term Merchant Cash Advance. The key when it comes to both a merchant cash advance and invoice factoring is that neither solution is technically a straight-up loan. When a provider offers you a business merchant cash advance they purchase your future credit card receivables and issue you a cash advance based on your likely future card sales. Likewise, an invoice factoring company will advance your money on the basis of an outstanding invoice being paid to your business.

You will also find many companies in the retail banking sector referring to a ‘cash advance’ simply as another term for a loan, payday lenders in particular like to refer to a ‘cash advance’. In this article, we will focus only on a business cash advance – predominantly on what a merchant cash advance is, the best merchant cash advance companies, and how to get a cash advance for business.

USA Lenders:

Elevate Funding

Cash advance online bad credit: Yes

Same day cash advances online: Yes

Elevate provides a cash advance online with no credit check or minimum credit score required to apply – no matter the amount of funding you’re seeking. Elevate evaluate your business based on their own requirements and background checks of your business. If approved funding can be released as quickly as the same day – sent via bank wire.

 

National Funding

Cash advance online bad credit: Yes

Same day cash advances online: Yes

National Funding’s slogan is “We only get paid when you get paid.” There are no fixed payments and payback is easy. National funding simply receives a small percentage of your business’ credit card sales each time they’re batched. That percentage never changes so even if the business is slow you’ll pay the same percentage of sales. MCA’s available up to $250,000.

 

How Does a Merchant Cash Advance Work?

Each of the businesses we’ve listed differ somewhat in the way they manage their cash advance model. But the underlying mechanism is the same – money is quickly loaned to a qualifying business, on the basis of future funds they are expected to receive, either via their merchant network or outstanding invoices, yet to be paid by clients.

So, how does a merchant cash advance for business work in practice?

Well, with most types of MCAs, a provider will offer you a lump sum of cash in exchange for a slice of your daily credit card and debit card sales. The lender will work directly with your merchant provider and receive payment directly until your merchant cash advance is paid off. The best merchant cash advance companies can just plug into your credit card processor, they can be easy-to-access, quick products. The MCA provider will get a clear snapshot of your credit card receipts.

So a merchant cash advance is really only suitable for businesses that make a substantial amount of their revenue from credit card and debit card sales (whether via a terminal in person or online). Credit and debit card sales don’t have to be your main revenue driver of course but if your business only makes 5% of its revenue via a merchant acquirer then it’s important to highlight the funding you receive will be relative to the amount you make via merchant sales in the first instance.

A merchant cash advance is definitely one of the fastest financing options out there but it is also one of the most expensive business financing tools on the market.

Learn more about the interest mechanism on our article about Merchant Cash Advance APR.

What Businesses Can Benefit Most From a Small Business Cash Advance?

Any business that has trouble maintaining operations, or funding business initiatives due to unpaid invoices or other cash flow issues will likely benefit from the cash advance model. You can even use a merchant cash advance for a business opportunity. These include some of the smallest businesses, as long as they are equipped for credit payment and maintain business or accounting software to communicate with the lenders’ systems.

As previously discussed, a merchant cash advance works best for businesses that generate a significant portion of their revenue via credit and debit card sales so typically an MCA can work well for B2C businesses.

A bad credit business cash advance is definitely possible too. In fact, a merchant cash advance for business acts as a great alternative to a bad credit business loan – the funding is based mostly on your merchant volumes and little else.

Invoice factoring, where borrowers receive an advance of roughly 80% of the value of an invoice and the rest when your customer makes the payment, typically works best for B2B businesses.

How to Apply for Cash Advance Online?

Almost all business merchant cash advance applications are completed online. The best merchant cash advance companies pride themselves on speed, meaning applications are often approved the same day you apply. As a general rule of thumb however, fast cash comes at a premium and a merchant cash advance for business is no exception. A merchant cash advance application is quick and easy, but MCAs come with one of the highest costs of capital on the market.

The most important part of the application process is for MCA providers to look at your credit card statements to make sure you have enough volume coming into the business and are a suitable fit for a merchant cash advance. This is what makes an MCA a good option for businesses with poorer credit as the lending decision is based on this. Some merchant cash advance companies will also ask for your credit score and bank statements but they won’t have as much influence in the lending decision as they do in other types of financing.

When applying for a merchant cash advance for a business you should come armed with:

1. Credit Card Statements
2. Driver’s License/Government ID
3. Business Tax Returns
4. Bank Statements

Small business cash advance loans with no credit check are definitely possible and this can be one of the biggest factors for businesses wanting a merchant cash advance. Some merchant cash advance companies may conduct a light credit search but it can be quite normal not to have a credit check. Your initial application shouldn’t impact your credit rating but it’s worth verifying this with the MCA provider you choose to apply with.

Is Early Repayment Possible With a Small Business Cash Advance?

The new breed of online lenders very rarely charges early repayment fees but regardless both a merchant cash advance and invoice factoring are unique with their repayment schedules anyway.

With regards to invoice factoring – the advance will be settled when your customer makes payment – so the longer the time it takes for your customer to pay its outstanding invoice the greater the interest you will be deducted from the final amount you receive.

As merchant cash advance repayments are based on a percentage of daily sales and not a fixed repayment like a term loan, MCA repayments are neatly tracked to business performance. So if your business performs well, you will be able to pay back more of your MCA earlier, if you’re generating less revenue via merchant sales then you can pay the advance back slower.  The higher the fixed percentage of your credit card sales you’re paying the lender, the shorter your repayment time will be. Generally, terms can be as short as 4 months and as long as 18, depending on your circumstances.

Considerations Before Taking a Small Business Cash Advance

When you take a merchant cash advance, your future cash flow will take a dent as you make a contractual obligation to pay a certain percentage of your future daily credit card sales to the lender. The fact that repayments work as a percentage means you can repay a smaller amount of money during slower periods and more during times your business is feeling flush. In contrast, if you were to take a term loan you would have the same regular repayment schedule which could prove tough to keep up with if your business is prone to dips due to seasonality or other factors like price fluctuations in the necessary pieces of equipment.

Remember merchant cash advance companies in effect purchase your future credit card receivables so a major benefit to a merchant cash advance is they come unsecured. You don’t have to offer a valuable business or personal asset in exchange for an MCA. If you don’t fancy putting your own house up as an asset in the lending process or your business is not eligible for an SBA loan then an MCA could be for you.

As we have already touched on, an MCA is also one of the most expensive forms of business financing. Part of the higher costs is due to the pricing model opted for by most merchant cash advance companies. Typically a cash advance is based on a factor rate, so it’s easy to understand exactly how much your business will have to repay but when annualized can be more expensive than interest rates. In addition to this, a merchant cash advance is also one of the preferred products for lenders to provide to riskier borrowers – businesses with a bad credit score or new businesses looking for startup loans. So naturally, the rates are higher in products more suited to riskier borrowers.

With all being said a small business cash advance remains a popular method of raising working capital for many businesses in the US. The number of merchant cash advance companies is on the rise and borrowers have never had such a variety of choices. Rates may be higher but if you need funding fast a merchant cash advance is one of the quickest funding solutions you’ll find and applying for a merchant cash advance online is simple and easy.