Using an MCA for Extra Working Capital


MCA stands for merchant cash advance, and this funding works well for small businesses in need of extra working capital. How the advance works is simple, and what you choose to use the money for is up to you. The best thing about merchant cash funding is you can secure much-needed money even if your credit is bad, because the lender will be looking at your customers and vendors’ credit instead of yours.


How This Funding Works


As an example, assume you have a set of purchase orders for upcoming inventory to manufacture a product and your design team has just approached with another idea that is sure to sell. You don’t have the cash to get the new idea onto the production line. Your outstanding purchase orders will cover the cost, but they aren’t due yet. What can you do?


You can approach an MCA lender with the set of orders. If the lender believes in your new idea, and if the credit of the vendors on the outstanding orders is good, he or she may give you a percentage of the outstanding orders in cash and then receive direct payment from the vendors to pay back the funding. This gives you the money you need to move forward with your new product and the existing one.


Another Example


If your business is to sell the product being manufactured above, you can also borrow money against your future debit and credit card sales. In this case, the lender will give you a lump sum and then take a percentage of your debit and credit card transactions based on an agreed upon schedule. In some cases, the percentage will be taken daily; in other cases, weekly or monthly.


How You Use the Money


How you use the money is up to you, and the first scenario provided a common reason why many business owners use merchant cash funding. You may also use it to meet unexpected financial needs due to a loss of business. Perhaps you run a seasonal business and want to buy additional inventory. You can do so with this financing vehicle. The possibilities are endless.


Using an MCA for extra working capital gives you the opportunity to grow your business when you need to, even if you don’t have the cash on hand. How you pay the financing back depends on the asset you offer up for purchase. This is what makes this funding perfect for most business needs. Everything about it is flexible and designed to work with you, not against you.

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