Common Myths and Misconceptions About Merchant Cash Advances (MCAs)

Merchant cash advances (MCAs) have become a popular alternative to traditional lending options. Rather than financing your business with a traditional bank loan, you may want to use an MCA. It’s fast, easy to obtain and available for nearly all types of businesses. There are some myths and misconceptions about MCAs, however, that you shouldn’t believe.

Common Myths and Misconceptions About Merchant Cash Advances (MCAs)

Same As Traditional Loans

MCAs aren’t the same as traditional loans. They are still classified as a form of debt financing, and like all other forms of debt financing, MCAs involve borrowing money from a lender. The difference between MCAs and traditional loans is that the former leverages your business’s future sales, whereas the latter does not.

Need Good Credit to Get Approved

Another common myth is that MCAs require good credit. Whether your business has bad credit or no credit, it’s probably eligible for an MCA; your business just needs to have a history of revenue transactions in a merchant account. If your business accepts credit card payments, it will likely have a merchant account. When you apply for an MCA, the lender will typically review your business’s merchant account. MCAs are alternative loans that are “advanced” to businesses based on their future sales.

Must Be Secured With Collateral

You don’t have to secure an MCA with collateral. While there are exceptions, most MCAs are unsecured loans. Unsecured means that they don’t require collateral. You can obtain an MCA without placing any assets up as collateral.

Takes Weeks to Get Approved

Traditional loans can certainly weeks — sometimes even a month or longer — to get approved. Fortunately, MCAs offer a faster form of financing. You can typically get approved for an MCA in just a few days. The fast approval times of MCAs, in fact, is one of the reasons why they’ve become such a popular alternative to traditional loans.

Payments Are the Same Each Month

When you obtain an MCA, you’ll have to make payments to the lender. Contrary to popular belief, though, payments for MCAs aren’t fixed. They are almost always based on a percentage of your business’s future credit card sales. As your business generates more revenue, you’ll have to pay more to the lender. If your business has a slow month, on the other hand, you’ll have to pay less to the lender.

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