A Merchant Cash Advance Live Transfers is an advance of capital repaid by future credit card sales. Business owners should consider other types of financing before relying on this method.
As an alternative to a traditional small-business loan, Merchant Cash Advance Live Transfers (MCAs) give you an upfront sum of cash that you repay with a percentage of your debit or credit card sales.
In the event that a small business needs capital immediately to cover cash-flow shortages or short-term expenses, Merchant Cash Advance Live Transfers are the best option. However, this type of financing can carry triple-digit annual percentage rates, which can create a difficult debt cycle. You should always consider other small-business loan options before applying for an MCA.
Before you choose a merchant cash advance, here's what you need to know about how they work.
Your business obtains a lump sum of capital from a merchant cash advance company, but this is not a loan. Instead, the provider purchases your future sales, and you use those sales to repay the provider.
The repayment structure for Merchant Cash Advance Live Transfers can be divided into two categories:
Traditionally, merchant cash advances are structured in such a way that a percentage of sales is automatically deducted each day (or every week) until the advance is repaid.
As compared to other types of business loans, merchant cash advances don't have typical repayment terms. They are based on your sales and can range anywhere from three to 18 months.
The funds can also be withdrawn directly from your business bank account by merchant cash advance companies. In this case, fixed repayments are made daily or weekly from your account regardless of how much you earn in sales, and the fixed repayment amount is determined based on an estimate of your monthly revenue.
Merchant Cash Advance Live Transfers repayment structures allow you to calculate exactly how long it will take to repay the advance based on the amount borrowed and are more suitable for businesses that do not rely heavily on debit or credit card sales.
For example, if you are approved for an advance of $50,000 at a factor rate of 1.4, your total repayment amount will be $70,000, which means you'll pay $20,000 in fees.
You should always calculate the factor rate and additional fees into an APR in order to determine the total borrowing cost for a merchant cash advance
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