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Since the financial crash of 2008, many businesses small and large have taken a hit to their credit as the economy has struggled to grow. Having poor credit can make securing business financing very difficult, although not impossible. For those facing this challenge, one potential option is the merchant cash advance (MCA).

A merchant cash advance allows business owners to obtain a large sum of money almost immediately in exchange for a percentage of their future credit card receipts. This is essentially the business form of a personal payday loan. Businesses with bad credit are advanced a lump sum, sometimes up to $150,000 with minimal paperwork and qualifications. In fact, all it takes to get a MCA often is just a look at bank statements or merchant processing statements. And no collateral is required, unlike with traditional bank loans.

In order to repay the advance, the business will be required to hand over the loaned amount plus around 25 percent. For example, if a business gets an advance for $30,000, the owner would be required to pay back around $37,500 out of its future credit card sales. The biggest catch is that these loans typically have to be repaid within six months, so the interest rates ends up being a lot higher than 25 percent. The true annual percentage rate (APR) can sometimes be as much as 50%!

The bottom line with a merchant cash advance is that can provide fast cash in a true financial emergency, but it is not a sustainable way to fund a business. Shopping around among merchant lenders is important in order to find the best rates. And owners should think carefully and examine all the associated fees and understand the terms before signing up for a MCA.


Search for Small Business Loan Sources and receive your matched lender list
AND received FOUR free Business eBooks worth $39.95!
Search for Small Business Loan Sources