When I first heard of Merchant Cash Advance (MCA), the first thoughts that came to mind were those shady commercials that come on late at night. The ones where the person offers to give anyone $50,000 just for calling the number. I was pleasantly surprised when I actually looked up information on how an MCA works. Unlike those companies, a MCA isn’t a shady late night TV commercial type of industry. It is a growing section of the banking industry that is making a splash on the big ocean of traditional banking. So, for me this is as much of a journey in learning as it is for you, the readers. So buckle in, let’s go!
What is Merchant Cash Advance?
The easiest way to describe Merchant Cash Advance or MCA would be similar to using a credit card to buy goods. But instead of goods, you are buying early access to the cash you project that your business will make. You are using your bank account as credit card for cash. You might think that this sounds very similar to a loan from a bank but there are several major differences. One of the biggest differences is that for an MCA, the merchant doesn’t have to put anything as a collateral. MCAs also have no interest rate and instead, it is a fixed cost. So even if the Advance is big or small, the cost will always be the same and the payment each month will always be the same. This will lead to the question of how Wide Merchant Group or any other MCA company is basically buying the future cash or deposits that the company will receive in exchange for cash now. So, you might start to think, oh, that sounds really complicated. They have to guess what my future deposits are going to be? How do they do that?
The process of evaluating and determining is called underwriting and we will discuss that in a little while. But we want to do our best to give you what you need when you need it. It is a symbiotic relationship and a win-win situation for many merchants and the MCA company. We want the merchant to succeed so our investment on the company and the merchant pays off.
So this still might leave you wondering...How does this work?
You might be looking at the problem like this. The basic math is often very simple. Say your business needs $10,000 to expand. The magical part will be the underwriting, as discussed earlier, is when we assess your file for seasonality, industry type, and pattern of deposits to determine the amount that can be advanced to your business. Once a MCA company, like Wide Merchant Group, has assessed your risk profile, the repayment plan needs to be determined. We take into consideration several factors to make sure that the repayment plan is comfortable and feasible.
What are the benefits of a MCA over a traditional business loan?
After reading about MCA, you might ask yourself “why would I go there when I can just get a loan from a bank?”. I know about banks, I know what they do, I know where they are, I even have a bank account. Why would I go to this unknown website for my financing needs when I can just ask my bank for a loan. The merchant then decides to apply for a loan and that is when they are hit by the truth. Similar to how you may look outside during winter and see the sun and decide, “oh wow! It looks really warm outside. I will go for a jog in my shorts” and once you actually do, you are hit with the nasty, chilly breeze when you open the door. It’s a very unpleasant feeling that many do not like to be hit with. While your bank teller maybe friendly when you want to transfer money or cash in a check, they become a different animal when it comes to loans and giving out their money.
1. MCAs are flexible
Getting a loan from a bank is notoriously difficult. Although they have access to huge amount of funds, they are less willing to let go of it. In an article by business.com, the author states that there are many reasons why it is difficult to get any loans from the bank. First, banks aren’t as flexible in their payments or offers. Federalreserve.gov, the department of government related to dealing with banks and loans states that “non-price terms, generally remained about unchanged, except for a modest net fractions of banks which indicated having eased loan covenants.” What this essentially means is that when your business stumbles upon an unexpected obstacle, banks won’t take the time to change the payments and offers to help the customer. That’s you. On the other hand, Wide Merchant Group agents are more than willing to work with you in order to assure that you are not only able to help the business grow, but also pay back the advance. They will make adjustments if the merchant is facing a new problem and help them figure out the solution together.
2. Minimal paperwork required
Many of us have probably experienced this already, but banks are notoriously infamous for being tied up with paperwork and red tape. SBA loans, which are loans that are supposedly easy to use and readily available, still require several documents just to get started. This is simply not the case with Wide Merchant Group since applying only requires an easy application and three months of most recent bank statements. Once approved, we do require additional documents but these are easy and simple to get and these are driver’s license, a voided check for banking purposes and as month-to-date of transactions. We do not require any other documents because we don’t want to make applying for an advance a monumental task that takes up time that can be better used to run your business. The amount of time and effort needed to get all the documents, the dreaded trips to the bank, is just time and effort that you can be spending towards your business.
3. MCAs are easy and they fund quick!
Banks still haven’t caught up to the MCAs in many areas because they have all been institutionalized. Over the next few years, we will see banks change and actually begin to offer options and try to become convenient for businesses. But in the meantime, Wide Merchant Group is part of a revolution in the industry that is big enough to make an impact for you and be in a position to help your company grow, but also small enough that they aren’t tied down by red tape and ten thousand steps to get a MCA. A very important point about Wide Merchant Group is that we will do funding within 24 to 48 hours once we get all the required documents. This means you do not have to wait for a long time in order to get funding. This distinction is very important because banks take a long time to underwrite and fund. I mean, even the collection of the numerous documents will take a long time. New industries also do not have traditional payment set up for deposits and traditional way of “making money” and these companies have terrible luck with banks. Wide Merchant Group is built on the promise that business owners are busy and therefore need quick service and solutions. Wide Merchant Group designed its new website with business owners in mind so that you can get quick so that you can get access to quick and easy to understand information and you can speak to a real agent in real life. Seriously! We have dedicated agents answering your questions in no time—away with those “sophisticated” AI machines that can’t understand real-life questions. Traditional banks do not offer these conveniences and although they have begun to use the internet, they haven’t fully implemented it into the everyday processes.
Mini Tangent: Very Brief Journey of MCA
So, although this is an relatively new industry, it still has history and with that comes changes. In the past, merchants usually gave up part of their credit card and debit card payments until the business paid off the advance. This is a good option because the payment each month will adjust based on the sales. If the company experiences low sales that month, the payment will be lower. This will help the owner breathe a bit easier knowing they won’t have to worry about paying the advance on top of worrying about the company. While this is good, it left large fraction of small businesses who don’t rely on credit and debit cards purchases unable to get any advances they might need. This is where the introduction of ACH comes into play. Automated Clearing House or as they are better known as, ACH, are automatic payments that will be directly deducted from your bank account. This essentially puts the worry out of your minds and lets you focus on things that matter like the well-being of the company. ACH payments are also constant so you also don’t have to worry about giving up more of your income when your company actually does start doing well. For many owners, the stability of the withdrawals and having the option of ACH is a huge plus.
What Do I need to apply?
So, the basic process of getting a MCA goes like this. Go to WideMerchantGroup.com, apply with the easy-to-fill application, and one of the friendly agents will contact you to access your business needs, learn about the unique features and intricacies of your business so that we can better understand you. From there, we will answer all of your pressing questions. If you’re still interested, at that point, we will only need your 3 most recent statements. Depending on your business unique challenges, the funding can take place in 24-48 hours from the time the process begins.
