There are a lot of choices when it comes to cash flow financing, but they are not created equal, and that’s on purpose. Some products are designed for one-time infusions of working capital. Others are built around their reusability, like credit lines. When it comes to asset-based financing models like the merchant cash advance, their uses are versatile but their usefulness depends on the value of the underlying asset. In the case of the MCA, the more business you do through your merchant account in an average month, the more you can expect to get.
Since this is an advance against the money you will earn through your merchant account, the payment is flexible. Typically, the lender agrees to accept a percentage of your earnings through that channel until the balance is paid with interest. How quickly or slowly that happens depends on how much business picks up after you put your capital to work. The more you make, the faster it gets paid down.
Most MCAs are designed to be paid down in three to six months at your average volume of business, although the exact window changes from lender to lender. Of course, slow business could extend that timeline as much as a demand surge could shorten it.
Flexible Financing for Any Purpose
You can use a merchant cash advance for regular cash flow financing if you need it, but it is often used for an influx of capital right before an anticipated busy season. If your business cycle is predictable, it’s easy to figure out when an advance would let you maximize inventory purchases and really cash in on the rising demand.
MCAs are also frequently used to deal with unexpected setbacks. If you need capital to repair your facilities or to hire additional staff because of a change in your operational needs, the fast approval time and fluid payment structure of the MCA is often ideal.
The last common use for the merchant cash advance is for regular renovation or rebranding on your long-term schedule. In many businesses, rebranding happens every five to seven years, with renovation and redecoration to freshen up the current branding every two to four years.
Those operations can be expensive, especially if you have to change the appearance of your public-facing space while investing in a new wave of marketing campaigns. Using an MCA to get the capital you need can speed up that rebranding process and bring in a new influx of customers as well as supercharge your inventory or help your staff up.