A Merchant Cash Advance sometimes referred to as an MCA, a Business Cash Advance (or Cash Advance), is when a company (referred to as the merchant) receives a lump-sum of a cash deposit or payment into their business bank account from a merchant cash advance company. The MCA is not a microloan.
In exchange, the business owner or merchant agrees to pay a percentage of their future debit card or credit card sales until the cash advance is satisfied.
The remittance or repayment period is either daily or weekly. Your company is selling its future credit card receivables at a discount. The result is that the payment terms are “factored” and is not considered interest. Therefore, technically, this is not a loan. Hence the name “cash advance” and not a cash advance loan
Cash Advance Loans are a reflection of your company’s ability to repay a percentage of your daily receivables and credit card transaction and not your personal credit. The MCA lender or cash advance companies look at your cash flow, and not your credit history. The merchant cash advances provide merchant funding anticipating future revenue and future receivables that reflect daily debit and credit card processing. The result is that repayment is variable as a reflection of daily sales. A traditional loan offers only fixed payments regardless of the ebb and flow of your daily or monthly business revenue. A fixed payment loan is a term loan. With a cash advance, you are selling your future receivables at a discount.
As an example, with a business loan, I’ll borrow $100,000 and repay $115,000. The business owner whose looking for merchant cash, will sell $115,000 in future receipts and receive $100,000. One reason for the ease and popularity of receiving the merchant cash is unlike the term loan, approval is typically not contingent on the business owner and his or her credit.
No hassle – no worry – automatically repay the advance.
Flexible payback amounts
Payback made daily or weekly to improve your available cash resources.
This small daily percentage that you pay is known as your “holdback.” The holdback “percentage” can range from low single digits to as much as 30%.
The full amount is repaid over an extended period and reflects your daily credit card revenue. As a result, you can only guesstimate the length of the advance.
Use the loan calculators above to determine your lump sum amount, factor rate, and term to generate the repayment amount.
When your daily revenue is low, your repayment for that day will be small. When your revenue is high, your repayment will be larger.
1 Page Application
3 Months Bank Statements
24 Hr. Approvals
24 Hr. Funding
The merchant cash financing option provides rapid capital funding for any business with uneven cash flow or seasonal businesses. Primarily, any business with a lot of credit card transactions.
Our application process is quick, convenient, and is entirely online. As a small business owner, you don’t have to provide any collateral or assets, and there’s no maturity date. There is no cost or obligation.
Our MCA lending team quickly analyzes your company’s revenue, based on credit card transactions to give you a decision in as little as one business day, and the funds typically hit by the second business day.
For decades, small businesses in need of an infusion of money had limited financing options: apply for a traditional small business loan and hope for the best.
Today, banks and traditional financial institutions have mostly moved away from providing this business type of funding as the primary source of small business loans. The process is more hassle than it’s often worth. Plus, the requirements and bank covenants are too often prohibitive.
To be approved by a bank, you typically need considerable assets and collateral. Banks often also require a personal guarantee – from all the principals. The banks also primarily base their decision on your FICO credit score and business credit bureaus and not credit card sales. This lending approach prevents many companies and their owners from getting business financing.
Taking out a bank loan or business line of credit can be a gamble. You need a certain amount of money now, but due to the unpredictable nature of operations, you’re wary about being locked into potentially high, inflexible monthly repayment.
A merchant cash advance may be an excellent option if you need cash quickly for working capital needs, and you know you can pay it back in a short amount of time. For example, making a payroll or purchasing inventory that sells right away.
If this sounds like an excellent fit for your business, start exploring different merchant cash advance options that work with your sales and budget.
Sunwise Capital, a leading merchant cash advance provider, offers excellent alternatives to the line of credit: business cash advances.
With this lending model, you receive the cash advances that you need quickly to alleviate cash-flow problems and then repay the funding through variable daily payback based on the ebb and flow of your business.
Everything about the advance is customized to suit your company’s unique needs. Best of all, our business cash advance underwriting and approval process are quick, so you can get the money that you need in a flash.
All companies experience ups and downs when it comes to money. That’s especially true for small businesses because they tend to have a lot less “wiggle room” where cash is concerned.
When you need some extra cash to keep your business going, however, taking out a traditional bank business loan is a bit extreme.
After all, it means paying hefty application fees, completing a complicated and lengthy application and waiting weeks or even months for a decision.
By opting for merchant cash advances from Sunwise Capital instead, you can get the money that you need without all the hassle. Simple, straightforward business cash advance loans.
Sunwise Capital, as an advance provider, uses a scoring matrix with over 200 variables.
Traditional bank loans and institutional lenders like credit card companies will focus primarily on the business owners personal credit score at the big three credit bureaus and secondarily on the other factors.
Small businesses in need of working capital or a line of credit, only had one type of financing: apply for business loans from the bank, credit union or traditional lender and hope for the best.
When applying for business loans from a bank or big institution, you typically must have a “sound business purpose.”
Today, banks have mostly moved away from giving shortterm business loans to small businesses.
Unfortunately, the process to secure traditional term loans is more hassle than it’s often worth. Plus, the requirements and bank covenants are too often prohibitive.
To be approved by a bank, business owners typically need considerable assets and some collateral. Banks often also require a personal guarantee – from all the principals.
Traditional lenders also primarily base their decision on your FICO credit score and business credit, which prevents many businesses from getting financed.
Since the amount that you are paying is more than the amount borrowed, how do you calculate what the repayment schedule will be?
This factor will vary among small business lenders. The quoted percentage helps you estimate the total amount to be repaid.
For example, if you agree to pay the amount borrowed plus 15%, then you can multiply the amount borrowed by 1.15.
You will then need to take into consideration any processing fees associated with the merchants cash advances terms.
To determine how long it will take to pay back the cash advance, consider the amount borrowed, and multiply it by the factor rate.
Borrow $100K with a factor rate of 1.17. Multiply $100K by 1.17 = $117,000.
Assume a 9% holdback of the daily credit card business.
Divide your monthly sales ($100K) by 22 (days in the month). Take that number and multiply by the holdback. $100K / 22 = $4545 (average daily sale).
Multiply that number of $4545 X 9% = $409. That is what you’ll pay daily.
Divide $117,000 (total amount owed) by $409 = 286 (payments to equal $117K). Assuming 22 days in the month, take 286 and divide by 22, and this equals 13 or the approximate number of months to repay the loan.
Step-by-Step Process: How to Calculate CASH ADVANCES
With this information, you can calculate approximate daily payments, how long it will take you to repay the loan, and the total amount you can expect to pay.
The loan amount or capital for merchants is a percentage of your monthly credit card receipts. This amount includes debit card sales and your daily credit card sales. To calculate your total borrowing amount, multiply your credit and debit card annual revenue by 10 to 13 percent.
Let’s assume your company generates $200,000 a year in annual revenue. Take 10 to 13 percent of that number. That means you’ll receive between $20,000 and $26,000 as the borrowing amount.
$200,000 x .10 = $20,000
$200,000 x .13 = $26,000
The risk to the MCA provider determines the factor rate. One significant difference between an annual interest rate and factor rate is the factor rate is not in percentages like interest rates.
The factor rates show as a decimal figure. They range from about 1.1 to 1.5 based upon the risk. Again, using the example above, we’ll use the $20,000 cash advance amount.
Your total repayment is between:
$20,000 x 1.1 = $22,000
$20,000 x 1.5 = $30,000
We know your sales fluctuate from day-to-day. Therefore, it’s not a fixed amount of money paid back each day, but a percentage of your transactions.
This percentage is referred to as the “hold back.” It is the % of future credit card sales. The result makes it hard to calculate the total cost of a merchant cash advance.
Use the annual percentage rate calculator above to get an estimate of what you will expect to pay on a merchant cash advance.
Defaulting on any loan can cause a cascading effect. If you signed a PG (personal guarantee), the merchant could come after your personal assets. Most MCA companies do not ask for that PG.
However, if you switch bank accounts, change your merchant account processor, start taking mostly cash or impede and hamper the ACH payments, this can constitute default.
In no time, you can find out what you qualify for and have cash in your hands before you know it.
Our professional services are backed up by a $500 guarantee.
If you find a business loan or a merchant cash advance with a better rate, we’ll either beat it or give you $500.
Get the cash advance that you need for your business by applying for Sunwise Capital Merchant Cash Advances MCA today. As online lenders, we can also provide alternative financing as a capital loan, SBA loans, or invoice financing.
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