The smart way to take a cash advance from a merchant

The cash flow of a business is vital and important in order for it to continue to function and be able to accomplish day-to-day tasks. But what happens when your business isn’t getting enough cash? One of the best alternatives is to request a cash advance from the merchant which you can then pay with each credit card sale you make. If you want to know more about this type of service, you can click here.

What is a merchant cash advance?

A Merchant Cash Advance (MCA) is a cash credit obtained from your credit card amount. It’s instant cash that you can get quickly and securely at ATMs, cashiers in financial service centers, and even on the web.

In general, the maximum value of your advance may depend on the space available on your credit card as the money will go to your account immediately. You will have to pay it through your credit card.

When you request a cash advance, you will see the interest and commission value reflected in your next account statement. However, it will automatically be reduced for each sale you make.

Advantages and disadvantages of an MCA:

While the cash advance offered by credit cards is a great tool and means, as in anything related to finances, the most important thing is knowing when to go and when not to.

Benefits of getting it

  • You will have money readily available in your bank account or in cash if you are going to withdraw it from your card directly from an ATM.
  • You will have the power to decide the number of installments to defer payment. However, some banks allocate the quota automatically.

Disadvantages of getting one

While this type of credit seems like a great alternative for small business owners, you need to be vigilant and consider how it can affect your economy.

Some possible drawbacks are:

  • It will cost you more than using a credit card directly.
  • This can affect your credit history because it shows that you have no cash and that you are in debt.
  • The use of credit cards in this manner does not apply to the accumulation of miles or points.

The smartest way to use a credit card advance is to do so when it’s exclusively needed. When the money is withdrawn at the physical branch, people can ask for the number of installments they want to pay off their debt, and it can range from one to 36. While when they go to the ATM, the payment is automatically divided into 18 months. It all depends on the financial institution.

However, depending on the interest the bank charges, it is best to only use these advances for large amounts. If it is a short amount, it is better to turn to a friend or relative to apply for this loan and, thus, possibly, to avoid the interest.

Best options for taking an MCA:

According to Orbis Research, this type of advancement is on the rise and more and more common in small businesses. Considering that this is a popular alternative, like any type of credit, it will generate a level of debt. It is essential to be careful when choosing which entity to apply for the cash advance your business needs.

To determine whether an entity is a good option for requesting a cash advance, consider the following:

  • The requirements. In general, this type of financing does not require higher standards, like the ones you would have to have when applying for a loan. Suppose an entity asks you for many requirements. In this case, you will surely be able to find another one that makes the process much simpler depending on your level of urgency.
  • The interest rate. This is very important for your economy and any money lending. You will probably want to use the option with the lower rate, so take the time to evaluate and choose the best one.
  • Method of payment. The most common thing is that the amount you owe is automatically deducted from the sales you make. However, it is possible to get other entities with different forms of payment. This is something that you should also consider and choose the one that best suits your needs.

Tips for recognizing yourself as a great candidate to take this path

While cash advances are a great alternative for getting cash fast, you need to be honest about whether you really need it and are a good candidate for it.

Have a stable income stream

A cash advance will help you if you need it. Still, suppose you don’t have reasonable financial control or a continuous flow of money. In this case, it will be difficult for you to repay your debt or to be significantly affected by the interest which will be subtracted from your sales and will affect your profitability.

You must have a good level of annual sales made with a credit card

The types of bank financing are different and can range from $ 5,000 to much more. But that’s something that will depend on the percentage of daily sales you receive with a credit card. The more sales you make with this medium, the more the bank can offer you a higher amount. This is because, in this way, they assess your ability to pay.

Try to have a good credit score

For this type of financing, banks are generally very flexible. However, this is something that will influence the bank’s decision anyway. However, even if you have a low score but a high level of credit card sales, you will likely be given the advance.

If this financing option catches your eye and you are interested in getting it, please assess very well if this is exactly what you need and if you are eligible to receive it. Finally, if you decide to get a cash advance, you can get the most out of it with good financial planning and clear goals.


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