How merchant cash advances are benefiting the UK’s small business owners
9 November 2014 |
With capital-starved small businesses turning to a number of alternative funding options, we, as chartered accountants, identified the benefits of merchant cash advances (MCAs) as the solution to small-business funding woes.
MCA looks set to replicate the phenomenal growth experienced in the US, where over the past decade it has become a mainstream funding option, growing from approximately $500million worth of advances in 2010 to an estimated $3billion in 2013.
Simply, an MCA is a convenient way for any business that takes payment via credit and debit cards to raise unsecured funding. The business receives a lump sum in exchange for a small percentage of its future card takings. Each day, that percentage of daily card takings is automatically collected via the firm’s card terminal to repay the advance.
Where an MCA really sets itself apart from other forms of lending is how the product is aligned with the cash flow of the business. There is no term attached to the advance and an all-inclusive fee is charged. This means that there is no strain on the business during quiet months as repayments automatically reduce and there are no mounting interest costs to worry about.
The other key benefit is the speed and simplicity of the application and approval process. There is no need for business plans nor security, and we advise within 24 hours whether the applicant has been approved. Approval rates are significantly higher than regular bank loans because business performance is the main factor in considering an application rather than credit rating.
MCAs offer small business owners the unsecured funding they need in a faster and easier fashion, and look to be the alternative means of finance UK business owners desperately need.