inventory financing, working capital

What is a Merchant Cash Advance and How Can It Help Your Business?

posted in: Blog

For small businesses, funding is essential. But what do you do when the funding is a bit lacking?

You get a loan, of course.However, there are many different kinds of loans to choose from.One inventory financing loan, known as a merchant cash advance, could help you keep your business on track.

What Is Inventory Financing?

Short-term, asset-based loans fall under the umbrella of inventory financing loans. The purpose of these loans is to help you purchase the necessary inventory for your business.

After a set amount of time, you’ll have to repay the loan. Hopefully, you’ll be paying off the loan using the money you make from selling your inventory. Ideally, you’ll have money left over to add to your business’s profits.

However, if you’ve not yet made enough, your lender will simply take the inventory you’ve purchased with the loan. These types of business loans are commonly used by small businesses such as:

  • Restaurants
  • Retailers
  • eCommerce sites
  • Wholesalers

It can be incredibly useful when your initial overhead is lacking but new business prospects look promising.

Many different types of inventory financing are designed to help boost your working capital, including a merchant cash advance.

What Is a Merchant Cash Advance (MCA)?

A merchant cash advance, or MCA, is not a business loan. As the name suggests, it is a type of cash advance on any future sales you’ll make.

Instead of paying back a loan, your lender will receive a portion of your weekly credit or debit sales until you’ve repaid the full amount. In some cases, you’ll have to pay back certain agreed-upon fees.

What Can I Do With An MCA?

Merchant Cash Advances have many different uses for a variety of different businesses. Some of the most common ways to use an MCA include the following:

  • Boosting cash flow
  • Increasing marketing and advertising efforts
  • Purchasing new inventory
  • Boosting hiring
  • Purchasing or repairing equipment
  • Improving or building a website
  • Expansions or remodeling of current locations
  • Dealing with unexpected expenses

There are many other ways to use an MCA. Essentially though, they’ll help you when times are tough, but future prospects look good.

The Benefits of an MCA

Choosing an MCA over other business financing options can come with additional benefits. For example, if you need cash quickly, an MCA is one of the easiest ways to get it. Generally, the money will hit your account within a week.

Other benefits include:

  • Payments based on sales without set payment amounts
  • High approval ratings, even with bad credit
  • No requirements on how to use the money
  • No risk to assets or credit

While an MCA isn’t right for every type of business, it can provide some major benefits for many struggling business owners.

Get a Merchant Cash Advance Today!

Now that you know a little more about one of the most common and flexible types of inventory financing,you can help keep your business on track.

Get a free quote to find out how much you can get for your small business today. With Penn Commercial Capital, you can trust that your business’s finances are in good hands.