A small business guide on Merchant Cash Advance. What is a merchant cash advance, how it works, strategic uses, pitfalls to avoid, and how to find a reputable merchant cash advance company.
5. MCA VS. Bank Loan
Advance on Future Sales Money lent based on cashflow and/or collateral
Factor Rate Funds lent at a fixed rate of interest
Loan Amount may be much greater than an
Amount of Advance Limited by future sales
Advance
Unregulated Industry Highly Regulated
Application and approval processing is Application process is usually lengthy and high
quick and easy. decline rates
Much lower approval rates. 60% of bank loans
High approval rates
declined
Bad Credit = Approvals Bad credit = Decline
No personal Gurantee May require personal guarantee
No fixed repayment amount Fixed repayment amount
No fixed repayment terms Fixed Repayment Term
Will not show on credit report Will show on your credit report
Fees are tax deductible Fees are deductible
MCA VS Bank Loan
10. Defined use of the funds
Growth or expansion are the best
uses of the funds
Compare the Internal Rate of
Return
Negotiate for the lowest possible
daily retrieval rate
Negotiate for the longest possible
payback period
Strategic Uses of Merchant Cash Advance
11. Merchant cash advances are expensive, but large credit card
purchases will cost you more
Credit Card
CREDIT CARD
Interest Rate Cost to Company
15% $ 8,861.66
16% $ 9,537.42
17% $ 10,222.15
18% $ 10,915.53
19% $ 11,617.30
20% $ 12,327.15
Top 10 Most Funded Industries
2nd Qt 2011
FACTORING
Factor Rate Cost to Company
1.20 $ 2,000
1.25 $ 2,500
1.30 $ 3,000
1.35 $ 3,500
1.40 $ 4,000
1.45 $ 4,500
Don’t Put It On The Credit Card
12. What to Avoid
High Daily Retrieval Rates
Adjustable daily retrieval rates
Short Payback Periods
Dogpiling
Switching credit card processors
Merchant Cash Advance Pitfalls
13. How to Find a Reputable Merchant Cash Advance Company
Know your merchant cash advance
company- Honesty Integrity and
Intelligence
Full Disclosure—No hidden fees or
adjustable rates
Excellent Customer Service—courteous
Get Multiple Quotes through Blindbid