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No matter your business model, online companies rely overwhelmingly on electronic transactions. Whether you’re streaming entertainment, operating a retail outlet online, or offering remote professional services, the online aspect of your business makes any other kind of payment less convenient. As a result, the merchant cash advance might just be your best option for short-term financing when you need a little extra working capital.

Qualifying for an MCA

An advance against your merchant account is exactly what it sounds like. Lenders evaluate your income through that channel, your business credit, and a few other factors to determine the maximum advance size and cost. Companies with merchant accounts in good standing tend to qualify easily, but the cost of capital changes with the company’s credit score and overall income. If your business does make money through channels other than your merchant account, it might make lending to you lower risk by providing you with additional income to cover expenses, but it will not increase the size of the advance you’re offered under most circumstances.

Interest Costs and Payments

The merchant cash advance is not like a term loan or credit line. The payments aren’t fixed or based on the total balance of the debt. Instead, they are based on your income. MCA repayment is expressed as a percentage of your merchant account. The more money you make in a month, the faster it is paid back.

There are interest charges each month as well. Like many short-term instruments, the annual rate can be quite high, but that is because merchant account advances are designed to be paid back quickly when used correctly. As a result, they’re often less expensive out the door than some instruments with lower rates and longer repayment schedules.

What Can You Do With an MCA?

Online businesses use the merchant cash advance to make large stock orders when a highly anticipated product is being released. For companies that make their own goods, that means supplies to fill order demand. For retail businesses, it means being able to take full advantage of much-anticipated products in your niche, offering availability after competitors sell out of their initial orders. That kind of foresight is the key to making the most of those opportunities.

Merchant cash advances are also quite useful when you need to bring in short-term labor because demand has already grown and you have orders to fill. It gives you the working capital to bring in people that can catch up your work and keep your customers happy, so you don’t have to worry about finding the cash to call in temporary labor, you can just do it.