Follow us for daily updates
Finguard Logo Colored
Best Insurance Brokers in Brisbane
Genuine and Non-Genuine Savings For Home Loans

Merchant Cash Advance: Advantages And Disadvantages

When you want to buy a home or property for your business, either people pay cash upfront or require a loan. With the rising prices of properties, buying upfront is hardly possible for people. Instead, they pay some percentage upfront and pay the rest through loans. There are various options that one can opt for when applying for loans, one of which is merchant cash advance. 

In this blog, we will learn about merchant cash advances and what are its pros and cons. You must contact the best finance broker in Brisbane when planning to get a loan to buy any property. Depending on the type of loan, the process may differ. If you are applying for a home from a bank or private, the home loan process will be different, but if you are applying for a government scheme or grant, then its procedure will be different.

What Is Merchant Cash Advance?

Merchant Cash Advance (MCA) is a type of loan that is usually beneficial for smaller businesses that need quick access to cash. In this, a business borrows money upfront against its future sales and repays the borrowed money by paying an agreed percentage of its daily sales. The repayment rate is variable: low income means lower repayment amounts and higher income means higher repayment amounts. The duration lasts until the advance is fully repaid. Additionally, the lender may charge additional fees, so you may end up repaying more than you borrowed. Thus, it is considered more expensive than traditional loans. Consult a mortgage broker in Brisbane before applying for a merchant cash advance and know how suitable it is for your requirements. 

Let us understand this with the help of an example:

Example: Suppose you have a coffee shop business and need $10,000 for an espresso machine; you borrow this $10,000 from the lender as a merchant cash advance. You agreed to repay $12,000 to the lender by paying 10% of your daily sales. If you earn $500, you pay $50, and if you earn $300, you pay the lender $30. In this, the loan will continue until you pay $12,000. This is known as a merchant cash advance.

Advantages Of Merchant Cash Advance

The benefits of merchant cash advance are as follows:

  • Quick Access To Funds: Merchant cash advance is the fastest way to get a loan, as the lenders are more invested in checking your ability to repay than investigating various aspects of your business and income. Hence, it provides quick access to funds and helps small businesses that need quick capital. Contact a finance broker in Brisbane to apply for a merchant cash advance. 
  • No Collateral: In this type of loan, you do not need to provide any property or other asset as collateral. In this, the business’s future card payments are used to secure loans. Ensure that you consult a finance broker to avoid making mistakes when investing in any property.
  • No Fixed Monthly Repayments: Unlike traditional loans, where you have to pay monthly repayment, in merchant cash advance, this is not required. You and the lender agree on a per cent and additional fee. You repay the loan by paying according to your sales. High sales mean high repayment and low sales mean low repayment amounts. 
  • High Approval Rate: The approval rate of this type of loan is high, as the lender checks your ability to repay. Unlike traditional loans, where the lender checks your credit score, lenders do not check different aspects of income, assets, collateral, etc., for merchant cash advances. Lenders make a decision to approve within a few hours, and you may get the amount upfront in less than 24 hours. Consult a mortgage broker if you want to apply for a merchant cash advance. 

Disadvantages Of Merchant Cash Advance

The disadvantages of merchant cash advances are as follows:

  • Expensive: As the borrower needs to pay a percentage of income per daily earnings, it is more expensive than other traditional loans. Thus, it is suitable only for short-term capital requirements and for small businesses. 
  • Not Suitable For All Businesses: It is not suitable for every business; if you have a small business and require a loan for the short term, you can opt for a merchant cash advance. 

Conclusion

Merchant cash advance helps you get the cash shortly, depending on your ability to repay. In this, you can get a loan by using your business’ future card payments. It helps in accessing funds quickly, has a high approval rate, and does not require collateral and fixed monthly repayments, but it is expensive and suitable for small businesses only. Consult the best finance broker in Brisbane before applying for a merchant cash advance to ensure it is the best option for you.

Any Questions?

Make an online enquiry

Our enquiry form takes 2 minutes

Call us: 1800 346 473

We’re here to help from Monday – Friday, 8am – 5pm!