How to Choose the Right Merchant Cash Advance for Your Business

Main Street business owners often confused about alternative financing offerings. With so many options its often dizzying. Most important is that the business owner understands his/her situation and needs of the business.

A recent report found that an alarming 82% of business owners rely on personal savings and family/friends to fund their businesses at first. For those who try bank loans, more than 40% are rejected. For established business owners, capital is often a necessary part of growing and evens sometimes surviving.

merchant cash advance
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One viable alternative finance option for many small businesses are merchant cash advances (MCAs). An MCA is a quick and flexible financing option that can provide solid businesses with necessary capital in days (usually in less than a week), not months like traditional lenders.

Below are tips that can help determine if your business should consider an MCA:

  • You have a solid and stable business, but still can’t get access to capital
    Banks reject half of small business loan applications because they rely on the credit quality of the owner and the value of collateral to support the credit decision. Banks can overlook and ignore good businesses because they don’t look at the overall health of the business itself. A major benefit of working with an MCA involves a focus on the cash flow of the business and its future prospects, not the owners personal FICO score.
  • You need cash quickly
    For example, you get hundreds of unexpected orders and need to buy more inventory or supplies or need to work on renovations. An MCA can fund in 5 – 10 days. A bank will typically take more than one month to complete the loan process.
  • You are a seasonal business
    Seasonal businesses need cash before or during high season and require flexible repayment schedules to match their business activity. Unlike a loan, the repayment schedule of an MCA contract is tied to the amount of the merchant’s future sales. This allows a merchant with seasonal sales to gain access to much larger amounts of capital and decreases the merchant’s risk of default or having to repay a high, fixed amount per month during their slow season.
  • You have a young business; under 5 years old
    While most banks and other lenders require 3 – 5 years minimum business experience, most MCAs will provide financing after just the first year. To qualify with most MCAs, you only need to have been in business for one year and have gross sales of at least $10,000 a month for the last four months.

Lastly, it’s important to look for ethical MCAs fully committed to the overall success of the small businesses they serve. For example, look for an MCA that appliesa holistic approach to determine the funding amount and is willing to tell a business what is truly the right amount they can afford. Beware of unethical MCAs who are more interested in squeezing out high repayments from businesses.

When you work with a savvy MCA that allows you to get quick funding and re-pay it in a time structure that best works for your business, your business is able to address its needs – whether you need more inventory, want to jump on an immediate opportunity, execute a marketing campaign, relocate or expand – and grow as a result.

About the Author: Scott Griest is founder and chief executive officer of American Financial Solutions (AFS), one of the nation’s fastest growing merchant cash advances for small businesses. For more information, visit