A merchant cash advance program is a useful resource for many types of business. Most businesses need an infusion of cash at some point, to deal with an emergency most of the time. An MCA vendor can fill a need in such cases. Cash advances can also provide money to exploit opportunities. Merchant cash advances can be a good add-on business for some.
Merchant Cash Advance Programs:
Traditional business finance options do not work for all businesses. It is well known that banks only loan money to businesses in good financial shape. Being able to sell a percentage of credit card receipts offers better access to financing for many businesses.
The traditional cash advance is an advance against credit card receipts, with a premium added. This industry has expanded with the wide use of ACH services that allow businesses to electronically transfer funds via debit card, electronic wallet or electronic check. MCA vendors are starting to offer advances against those revenue streams.
MCA firms currently offer three payment options:
- Split withholding – The merchant and the MCA vendor split the credit card receipts. This is probably the most common arrangement today.
- ACH withholding – The MCA vendor withdraws money directly from the customer’s checking account. A typical cash advance would deduct a fixed percentage at a regular interval rather than a fixed dollar amount.
- Lock box or trust account withholding – The finance company creates an account to which all credit card receipts are forwarded. The finance company’s share of the receipts is then forwarded to their own account.
Merchant cash advance programs like the above offer a variety of ways to get advances and pay off the MCA firm. MCA services have become a pretty good option for businesses looking to expand the financial services they offer.
Adding Merchant Cash Advance Services:
Some businesses might be able to boost their profits by adding merchant cash advance services to their current offerings. Payday loan companies seem like a logical place for a new MCA service. Regulatory requirements may determine whether the option is a viable one.
Starting a new MCA company or division might be an option, but one with limited potential. The regulatory demands might be high. The start-up costs would run into a couple of million dollars. Brokering cash advances would be a better option for most business owners.
The ability to buy revenue from virtually any type of ACH transaction means that the market is much larger. Most small businesses either do not take credit cards or do not have sufficient credit card receipts to be of interest to most MCA firms. A company that gets most of its money from other sorts of electronic transactions might still need a cash advance.
Merchant Cash Advance Program Options:
Business owners no longer need substantial credit card receipts to access MCA services. This fact has made merchant cash advances a viable option for a huge new customer base. A merchant cash advance program can be used in many ways to serve most any business with a decent cash flow.