BlackStone Funding LLC

Merchant Cash Advance

Merchant Cash Advance (MCA)

What is a Merchant Cash Advance?

A merchant cash advance (MCA) is a type of financing option available for businesses. It is not a traditional loan, but rather a lump sum payment given to a business in exchange for a portion of its future credit card sales or revenue.

With a merchant cash advance, the lender provides the funds upfront, and the business repays the advance by allowing the lender to collect a fixed percentage of its daily credit card sales or revenue until the total amount is repaid. This repayment method is often referred to as a “holdback” or “retrieval rate.”

One key aspect of a merchant cash advance is that it is typically more expensive compared to traditional loans. The lender may charge a factor rate instead of an interest rate, which is a multiplier applied to the borrowed amount. This means that the total repayment amount will be higher than the initial advance.

Merchant cash advances are often sought by businesses that require immediate funds but have limited access to other financing options or have difficulty obtaining traditional bank loans. They can be used for various purposes, such as purchasing inventory, upgrading equipment, or covering operating expenses.

It’s important for businesses considering a merchant cash advance to carefully evaluate the terms and costs involved and to assess their ability to repay the advance based on their expected future revenue. It may be wise to explore alternative financing options and consult with a financial advisor or accountant before committing to a merchant cash advance.

FAQs

A merchant cash advance is a financing option for businesses where a lump sum payment is provided upfront in exchange for a percentage of future credit card sales or revenue.

The lender provides funds upfront, and the business repays the advance by allowing the lender to collect a fixed percentage of its daily credit card sales or revenue until the total amount is repaid.

Holdback or retrieval rate refers to the fixed percentage of daily credit card sales or revenue that the lender collects as repayment until the advance is fully repaid.

Merchant cash advances are typically more expensive than traditional loans because they often involve a factor rate instead of an interest rate, resulting in a higher total repayment amount.

MCAs can be used for various purposes such as purchasing inventory, upgrading equipment, or covering operating expenses.

Businesses that need immediate funds and have limited access to other financing options or struggle to obtain traditional bank loans often seek merchant cash advances.

Businesses should carefully evaluate the terms and costs involved, assess their ability to repay based on expected future revenue, and explore alternative financing options. Consulting with a financial advisor or accountant is recommended.

Merchant Cash Advance Details

LOAN AMOUNT

Up to $500,000

TIME TO FUND

24 Hours

TERMS

3 Months - 12 Months

INTEREST RATE

1.10 to 1.50 Factor Rate

CREDIT SCORE

Not Applicable

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