Merchant Capital Advance: Understanding Repayment

Flexible, timely funding is crucial for business growth, especially in today's hyper-competitive landscape. However, traditional business financing options often come with complex, stringent requirements and lengthy approval processes, making many small business owners feel stuck. Enter the Merchant Capital Advance (MCA), a financing solution that can provide immediate access to capital.

Here, we'll explore an MCA's unique repayment structure so you can determine if this financing tool is the right solution for your business.

An MCA Overview

How does a Merchant Capital Advance work? Essentially, a funding company, like The Payment HQ, provides your business with a lump sum of capital in exchange for a percentage of your future credit card sales.

Because MCAs are not loans, there is no payment with interest due every month, making it a popular way to secure business capital, especially if you have a high volume of credit card sales.

Benefits

• Flexible—repayments are tied to sales, allowing you to pay more when business is good and less when things slow down. This flexibility can help ease cash flow management.
• Fast—a Merchant Capital Advance provides fast access to capital, with quick funding timelines, typically within a few days. Therefore, it's ideal for businesses looking for immediate capital for various reasons, like expanding your business.
• No fixed monthly payments—the repayment structure of an MCA reduces the risk of defaulting, as there are no fixed monthly payments you have to remember to pay.

Repayment

Instead of a fixed monthly payment and interest like what you'd get with a traditional loan, an MCA is an advance on future sales. That means repayment is tied to the sales volume of your business.

The three critical aspects of a Merchant Capital Advance repayment are holdback percentage, daily repayments, and factor rate.

Holdback Percentage

The holdback percentage is the predetermined portion of daily credit card sales the funding company collects until the advance is paid back in full. The more you sell, the quicker you can pay back your advance.

Your exact holdback percentage depends on several factors, including your specific agreement, but typically ranges from 5% to 20%.

Daily Repayments

MCA payments are automatically deducted from your business's daily credit card sales, so there's no need to remember to make payments according to a schedule.

Because your daily repayment will fluctuate daily depending on your sales, this is a great, flexible option for those with variable revenue streams. Automatic deductions are seamless, giving you one less business element to stress over!

Factor Rate

Just as a traditional loan uses an interest rate, an MCA uses a factor rate to determine the cost of the advance. The factor rate typically ranges from 1.1 to 1.5 and is a multiplier applied to the amount advanced.

For example, let's say your business has a 1.2 factor rate and an advance of $50,000. Your total repayment amount would be 1.2 x $50,000 = $60,000.

Turn to The Payment HQ for Your Merchant Capital Advance

Need immediate access to business capital? The Payment HQ is here to help! With:

• No upfront fees
• Capital up to $500,000
• Funds in as little as 24 hours
• Hassle-free MCA repayments

It's easy to see why we're the go-to funding source for business owners like you. Apply today!