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Everything You Need To Know About Merchant Cash Advances

Everything You Need To Know About Merchant Cash Advances

Part of running a successful business is understanding when and how to use merchant cash advances (MCA). This is especially important for start-up companies as a way to achieve financial stability in the beginning. So if you're asking yourself, "What is a merchant cash advance?" the answer is clear.

What Are Merchant Cash Advances?person counting cash in their hands

Merchant cash advances are essentially short-term business loans. To obtain one, you'll need to fill out a simple form and submit copies of recent bank statements for your business. If approved, you receive the total requested amount in one transaction. They require you to forfeit a portion of your business's credit/debit card sales to get the money up front. 

How Do Merchant Cash Advances Work?

Unlike with a typical loan, you don't make monthly payments on a merchant cash advance. Instead, the lender will take a percentage of the profits you make on a daily or weekly basis. For many small business owners, this makes it preferable to taking a traditional loan you may struggle to pay back. However, before deciding if an MCA is right for your business, it pays to consider both the pros and the cons. 

Pros and Cons

Some of the pros of using MCAs include being able to acquire cash quickly. While it can take weeks to receive approval for a bank loan, MCAs can be obtained within days or even hours in some cases. For many new business owners, it is easier to acquire an MCA than a business loan. Whereas banks want to see your business's credit score to determine if you are eligible for a loan, an MCA can often be acquired using nothing more than bank statements.

To get a business loan from a bank, you almost always need to put up collateral. Such a risky endeavor is not one that many business owners are willing to take. You can avoid this by getting a merchant cash advance. 

Yet for all the pros of using this type of funding, there are some cons to consider as well. Payments are more frequent than other types of loans, and those payments could be high if your sales are high—which could be off putting for some business owners. Additionally, there aren't any benefits if everything is repaid early.

Is This Right For My Cannabis Business?

A cannabis business has the potential to grow quickly in today's world. The good news is that there are MCAs designed specifically with this type of business in mind. Because of its controversial nature, many cannabis businesses may struggle to obtain funding. One way to increase your chances of success is to turn to a group of finance professionals specifically focused on the cannabis industry. 

person pressing red advance buttonAm I Eligible?

No business is eligible for an MCA if it has been in operation for less than three months. In addition, to determine eligibility, you'll need to allow potential lenders to see all the deposits made into your business checking account.  A business that lacks a sufficient number of credit card sales is not eligible for an MCA. Negative balances, overdraft fees, and a low daily checking account balance are often the reasons why small businesses get rejected. 

How Do I Get An MCA?

Getting an MCA involves more than just filling out the application. Your business will be scrutinized to determine whether you get it. Generally speaking, your business will need to prove annual sales have been at least $50,000. But you'll also need to submit additional paperwork. To get a merchant cash advance, you'll need to  provide your business's lease agreement, its tax ID number, and statements for both debit and credit cards. If you're ready to get started, contact the Canna Business Financing Team today to get pre-approved.

Posted by Canna Business Team



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In an industry that is constantly evolving, Canna Business Financing provides business owners with a reliable source to gather the most up-to-date information. From resources to fund the growth of your business to insights on best practices to scale, look no further!

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