Top 4 advantages of a merchant cash advance for small businesses

December 16, 2022

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Master ImageA merchant cash advance is a business funding alternative, that you can pay back using a determined percentage of sales and a small fee additionally. This kind of advance is ideal for small businesses that accept card payments from their customers. The lender provides the business with a cash advance, which it then repays as a percentage of its customers card payments using what is called a card terminal. This is a piece of equipment used to read the information on a credit card and charge a determined cost to it. The loan in this kind of transaction is only paid as cash flows into business.

As an entrepreneur or a small business owner, what are the benefits of a merchant cash advance? How can it improve the cash flow of your business? And how does it save you money?

Here are the top 4 advantages that this kind of process provides to a small business:


#1 Access to the cash value of their existing credit sales
Merchant cash advances allow small business owners to have access to the cash value of their existing credit sales or other kinds of collectible streams on an expedited timeline. By using these flows of cash, you approach a lender provider, who then will advance the funds to the business immediately. This can totally help your small business, providing a financial boost in your monthly cash flow that you have an account of. Nevertheless, you have to be aware that there is always risk when small businesses enter loan agreements. It is required that the borrower commits to pay on the agreed terms and in full. In case the need of repaying a loan arises in the future, then the lender provider will need to count with wider documentation from you as the business owner and additionally, more time before providing funding.

#2 Additional time to administer cash flow
A merchant cash advance can also provide a business owner with additional time for them to be able to administer their cash flow. Generally, when a merchant makes an advance of funds to their company, they are required to pay the specific amount of capital in full at the time the borrowed funds are received. If they face a remarkable increase of sales, but at the same time they have a reduction in purchases, they will have to incur interest and will have to pay penalties focused on the difference between the two figures. It needs to be remarked that this could deny the positive effects that the increased sales give, and it could create a situation in which the business would be operating under cash flow stress. Nonetheless, on the other hand, if the funds are received early, they can be able to fulfill their obligations and avoid the penalty charges and possible interest.

#3 Solution for short term finance necessities
Another one of the benefits that a merchant cash advance offers a solution for short term finance necessities. Typically, businesses produce significant growth in the first few months of business operations, but experience denials in sales during the rest of the year. This happens because a company or business does not count with the capacity of generating the same amount of sales all over again in an immediate manner. They might be requiring some kind of temporary funding to avoid a possible cash shortage during the holidays. When businesses contact a merchant cash advance provider, the lender will provide them with a loan that is based on their monthly sales revenue indicators and will be paid back over the course of the agreed time.

#4 Factoring rate
The last top advantage of a merchant cash advance for a small business is the factoring rate. A factoring rate is a determined percentage of a merchant's loan total amount that has to be paid back to the lender or the lending institution. Merchant cash advance flow is generally based on the interest rate. So if a business requires a higher interest rate than the current average rate, they could be able to receive lower payments by applying for an MCA. Additionally, a factoring rate can be really beneficial in that the company or business may be eligible for extra funding if their current cash flow problems cannot be easily straightened out. This factoring rate is often tied to a prime rate and may only have an increase over time. When businesses pay on time regularly, they can benefit from this.


Although many entrepreneurs and small businesses are not familiar with Merchant Cash Advances and do not completely understand the many benefits of it, once they educate themselves on the topic and can understand how it works, they start to see the benefits of using this specific option over alternative short term financing solutions. Additionally, when choosing to take a hold of the Merchant Cash Advance, the merchant is not required to provide collateral to safeguard the loan. When a business counts on extra money that needs to be invested and does not have access to the traditional financing resources and methods, MCA is probably the answer to providing the funds that they are needing.

These are 4 of the top advantages that an MCA offers, but these are not the only ones, there exist plenty of advantages for small businesses that are all related with allowances, more flexible agreements, and a secure financial way to fund and support your company and businesses in general. Remember that AMQ Funding is a partner you can count on to help you achieve any project you dream of. Our mission is to provide small businesses with a wide range of financing products that allow them to raise funds more efficiently to complete their projects. We look forward to participating in the creation of a sustainable future for your business.

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