Merchant Cash Advance.

Much like a traditional bank loan, a merchant cash advance is a lump sum that comes from a business funder; however, it differs from a loan in a fundamental way. Since an MCA is a financing package based on your business’ projected revenues, funders are essentially purchasing part of your business’ future sales performance and using that as collateral. The funder — AMP Advance, for example — will look at your business receipts for the past four to six months, then make an assessment of how much working capital they can offer you. As a result, your credit history isn’t such a crucial part of the equation. 

Once an agreement is signed, the money can be supplied to your business in less than twenty-four hours. 

The application process and charges for MCAs can differ wildly in the marketplace; however, companies like AMP Advance understand the territory that smaller businesses find themselves in, and they attempt to make the whole process as simple and cost-effective as possible. The application process at AMP Advance begins with a simple online form that takes only a few minutes to fill in. 

As mentioned before, a funder will need to take a look at your business bank statements for the past four to six months in order to arrive at a financing amount that’s suitable for both of you; however, assuming that you meet the basic requirements for an MCA, the whole process — certainly at AMP Advance — can be finalized in less than a day. 

The cost of an MCA varies depending on the funder you approach, but in general, they do tend to be more expensive than traditional bank loans. However, considering this kind of finance requires no collateral, little credit history, and next to no paperwork, it’s perhaps understandable. 

By and large, MCA costs are calculated as a factor rate — a multiplier of the amount of capital granted. For example, at AMP Advance, we work at a starting rate of 1.18 (18%). What that means in practice is if your business needs $10,000, we multiply that by 1.18, resulting in a total repayable amount of $11,800, which would be paid back on a weekly or monthly basis.

At this point, it’s important to note that there are two different types of merchant cash advances that businesses can choose from, depending on their needs. An ACH Advance (Automated Clearing House ) is the type of advance that we’ve been writing about so far — once the analysis and contract are complete, the funds are granted and paid back by automatic withdrawal. However, there is another type of MCA known as a Credit Card Split. In this scenario, although the factor rate is still fixed, repayments are only based on your business’ credit card sales. As a result, if your business is having a few lean months, there’s no fixed repayment figure that you have to meet, which is particularly useful for businesses that experience varied or seasonal trends in their sales. 

At AMP Advance, we try to make it as easy as possible for businesses to gain finance. That said, there are a few basic requirements you will need to meet in order to get started. Your business will need to have been in operation for at least three months, have gross monthly revenues of at least $5,000, be US-based, and have a business bank account, but that’s pretty much it. Assuming you can meet these requirements — and let’s be honest, if your business isn’t generating $5,000 a month, then perhaps you’re in the wrong business — it’s relatively easy to qualify. What’s more, at AMP Advance, your application has no impact on your credit, involves no application fees, and carries no obligation for you to take the funds.