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20 Benefits of MCAs for Businesses Looking for Funding

By Richard Wilson

Last Updated on

Estimated read time: 7 minutes

If you are thinking about getting a merchant cash advance (MCA) for your business, it’s important to understand all of the merchant cash advance benefits and drawbacks of this alternative type of business financing. MCAs are more than just quick access to funding; they provide several benefits that depend on your business’s current financial health and its capacity to secure financing.

In this article, we will explore 20 key benefits that MCAs can offer your business. Not all benefits will be applicable based on your unique capacity to secure funding at this time, but knowing all the potential benefits will help you figure out if an MCA would benefit your business.

What are the Benefits of an MCA?

Below is a table highlighting the 20 potential benefits of an MCA:

01. Simple Application ProcessComplete an online application in 3-10 minutes with minimal paperwork.
02. Quick DecisionReceive pre-approval in seconds and final approval usually the same day.
03. Easier Qualification CriteriaSix months in business and $8,000+ in monthly credit card sales are the main requirements.
04. Fast Access to FundsFunds are typically deposited into your bank account within 1-3 days.
05. No Restrictions on UseUse the funds as you see fit for your business needs.
06. Convenient Repayment ProcessA percentage of daily credit card sales is automatically deducted for repayment.
07. Flexible RepaymentsDaily repayment amounts adjust up and down based on daily credit card sales volume.
08. No Collateral RequiredNo need to provide business or personal assets as collateral.
09. Suitable for Short Trading HistoriesMCAs are available for businesses operating for only 6 months.
10. Higher Approval RatesApproval is mainly based on monthly credit card sales, not credit history so approval rates are higher.
11. No Detailed Business PlansNo need to write or submit complex business plans to back your application.
12. No Late FeesRepayments are automatically dedicated which removes the risk of late fees.
13. Bridges Cash Flow GapsMCAs can be obtained quickly to cover unexpected cash flow issues.
14. Provides Working CapitalFunds can be used for working capital, unlike traditional loans that often restrict this.
15. Leverage Future SalesUnlock future revenue and inject it into your business when most needed.
16. Good for Seasonal BusinessesMCAs help you manage revenue fluctuations during slower months if your business is seasonal.
17. Useful for EmergenciesQuick fund disbursement lets you pay off unexpected and emergency expenses fast.
18. Good for High-Risk IndustriesApproval focuses on the businesses credit card sales volume, not industry risk.
19. No Penalties for Early RepaymentRepay early without additional fees or penalties.
20. No Reporting to Credit BureausMCAs and payments aren’t reported to credit agencies, so other lenders won’t see them on your credit report.
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Let’s break down each benefit in more detail:

Benefit 1: Simple Application Process

The MCA application process is straightforward and simple. You fill out an online application form, providing your business information, credit card sales revenue, and submit minimal supporting documents. There’s no need to visit a lender or provide extensive paperwork. The simplicity of the process saves you time and effort.

Benefit 2: Quick Decision

When you apply for an MCA, you get a quick decision. First, you’ll find out if you’re pre-approved within seconds after filling out the application. An underwriter then manually reviews your application and supporting documentation for final approval. This manual review takes minutes to a few hours, which is still a much quicker decision timeframe than traditional lenders. 

Benefit 3: Easier Qualification Criteria for Businesses

Getting approved for an MCA is easier than traditional loans. You only need credit card sales of $8,000 or more, 3-6 months of business bank account statements, 3-6 months of credit card merchant statements, at least 6 months in business, and poor credit is acceptable. These minimum requirements make it simple to qualify for a cash advance.

Benefit 4: Fast Access to Funds

A cash advance can be deposited into your bank account within 24 to 72 hours, providing your business with rapid access to funds that you can use within your business in as little as 24 hours. With quick access to these funds, you can address immediate business needs without delay.

Benefit 5: Convenient Repayment Process

MCAs have a convenient repayment process that is hassle-free. The MCA provider deducts a percentage of your daily credit card sales automatically through your credit card merchant or from your business checking account to repay the cash advance, so you don’t have to worry if your fixed monthly payment goes through.

Benefit 6: Flexible Repayments Based on Credit Card Sales Volume

If your business earns more or less through credit card transactions, the daily repayment amount adjusts up or down accordingly for an MCA. This type of flexible repayment helps with your business’s cash flow, ensuring that the repayment amount is manageable during slower periods when credit card sales may be lower.

Benefit 7: No Collateral Required

An MCA is unsecured, so you don’t need to provide collateral as security to get a cash advance. This makes it easier to get approved for an MCA compared to a traditional loan that usually requires you to provide collateral, such as personal or business assets, to secure the funding.

Benefit 8: Suitable for Businesses with Short Trading Histories

If your business is new, like less than a year old, it can be hard to get funding from traditional lenders. But with MCAs, it’s different. They only require your business to be operating for six months to qualify for funding. This makes MCAs a good choice for businesses with short trading histories.

Benefit 9: Higher Approval Rates Compared to Traditional Loans

MCAs have higher approval rates than traditional loans because the main qualification your business needs to qualify is a steady monthly income from credit card sales, rather than credit rating, collateral, or financial history. With fewer eligibility criteria and requirements, your business has a much higher chance of getting a cash advance.

Benefit 10: No Restrictions on How Funds Are Used

You have the freedom to use the funds you receive from an MCA as you see fit for your business. There are no restrictions or limitations on how you can use MCA funds, unlike with traditional loans where there are stricter criteria on what you can and cannot use the funds for.

Benefit 11: No Need for Detailed Business Plans

MCAs do not require you to submit a detailed business plan with financial projections like traditional loans do. This saves you time and effort, as you don’t have to create a complex business plan to secure funding. 

Benefit 12: No Late Fees

With an MCA, you don’t have to worry about late fees. The repayment is based on a percentage of your credit card sales, automatically deducted each day. This means there’s no fixed deadline for you to make a payment, so you won’t be charged any late fees.

Benefit 13: Helps Bridge Cash Flow Gaps

Negative cash flow can happen to any business, leaving your business with insufficient cash on hand to cover expenses. When there is a cash flow gap or shortage, an MCA enables you to tap into future sales and provides the cash needed to fix the negative cash flow balance immediately.

Benefit 14: Provides Working Capital

MCA providers will allow your business to use cash advances specifically for working capital needs. When you apply for a cash advance, you can state that you need the funds for working capital. Traditional lenders are less willing to lend to businesses with unstable working capital who are requesting funding to stabilize working capital.

Benefit 15: Opportunity to Leverage Future Sales

An MCA allows your business to leverage your future sales to secure immediate funding. This means you can get access to capital based on your projected credit card revenue, giving you the ability to invest in growth opportunities or overcome temporary financial setbacks.

Benefit 16: Good for Seasonal Businesses

If you own a seasonal business, during slower months, an MCA can provide funding to support you through those seasonal fluctuations. You also only repay a percentage of credit card sales during these slower months instead of a fixed monthly payment. This means that if your sales revenue is low, your repayments will adjust downwards, helping to relieve the repayment pressure on your business during slower seasonal months.

Benefit 17: Useful for Business Emergencies

If your business faces unexpected expenses or financial emergencies, an MCA can be a helpful solution. Whether you need to fix equipment, handle sudden repairs, or cover unexpected costs, an MCA provides quick access to funds to solve the emergency. 

Benefit 18: Good for High-Risk Industries

If your business operates in a high-risk industry, MCAs can be a good funding option for you. Traditional lenders are hesitant to provide funding to industries with high failure rates. MCA providers consider your credit card sales volume instead of industry risk, making MCAs accessible to businesses in high-risk industries.

Benefit 19: No Penalties for Early Repayment

You won’t face any penalties if you decide to repay the advance earlier than planned or if your credit card transactions end up being larger than expected, allowing you to pay off the MCA sooner than anticipated.

Benefit 20: No Reporting to Credit Bureaus

Unlike other business financing options, MCA providers do not report to credit bureaus because an MCA is not considered a loan. This means that your MCA and your repayment activity won’t show up on your credit report. Other lenders won’t see that you’ve used an MCA as a funding option for your business if they check your credit report.

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The Bottom Line

If you need capital for your business, MCAs can help in many ways. MCAs are a good choice for getting quick access to cash. The application process is easy, and you can get a decision quickly. You don’t need to provide collateral or have a long business history. With MCAs, you can use the money for whatever you need in your business. Repaying the MCA is convenient, and it adjusts based on your credit card sales. You won’t be charged any late fees, and you can even pay off the MCA early without penalties. One great thing about MCAs is that they don’t affect your credit score. Other lenders won’t see that you’ve used an MCA. Overall, MCAs offer a lot of benefits but before making a final decision, you should also be aware of the 10 potential drawbacks of MCAs.

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