Maintaining a stable cash flow is important for every business. If it can’t be achieved independently, businesses resort to different financial solutions that suit their needs. Merchant Cash Advance is one of the financial solutions. It is not the same thing as a loan. We will circle back to recall the process of MCA and how to choose the right lender for your business
What is a merchant cash advance?
A merchant cash advance is when you sell your future card sales in exchange for immediate funds. Yes, future card sales! And how exactly can we sell card sales that have not taken place yet? By looking at your business performance and your average card sales from the past 8-12 months. These lenders then take back a fixed percentage of your card sales every month until the funds are repaid. Additionally, they charge set fees called factor rate.
Please keep in mind that MCA is only for non-cash sales made.
Choosing the right lender
Choosing a suitable lender for your business is important. Lenders have different factor rates, flexibility terms, repayment conditions, contract terms, etc. That’s why you must choose the right Merchant Cash Advance Lender for your business. For this purpose, market research is always a good idea. A simple Google search will list all your nearby lenders that you can call and get MCA funds in the same day.
6 factors to consider when choosing an MCA lender
Reputation
Consider the reputation of your MCA lender which automatically tells you about their credibility. Make sure you check out the experiences of their past customers and other reviews over the internet. It is one of the best and most convenient ways to check the credibility of your MCA lender.
Experience in your business industry
Now that you know the MCA lender you have chosen is credible, make sure you know if they have experience with businesses in the same industry as you. For example, if you are a restaurant owner then it might be best to work with an experienced MCA lender that other local businesses have worked with, so you know that they understand your market and sales flow.
Transparency in repayment fee
Apart from factor rate- the essential fee that MCA lenders charge to earn money, some lenders might charge some other types of fees. For instance, some lenders could sign up a 12-month contract with you, and then charge you a penalty fee if you want to opt out of the contract before time.
Our best advice is to go over the repayment fees all in the start. If a lender is transparent about their fee structure from the start, it’s a positive sign.
Flexibility in repayment
A lot of businesses don’t want to risk their card sales so they never opt for getting help using a financial solution. A lot of others have a fear of default or not being able to meet the repayment terms. A good MCA lender should provide you flexibility in the repayment terms before signing a contract.
Approval speed – same day
Most MCA lenders in the UK can give you MCA funds in just 24-48 hours. An efficient approval speed of an MCA lender speaks about their customer service as well as how much they support them.
Customer support
Always check for the ways you can contact your MCA lender. A good MCA lender should be accessible to potential and existing customers.
Red flags to watch out for:
If your MCA lender exhibits any of the following signs, consider it as a “red flag” and drop them as a potential MCA lender and look for other options
Hidden fee
If they keep coming up with an excuse to charge you extra, in the name of a penalty, extra fee, etc. Any additional charges like that should be communicated at the start so there’s no distrust or confusion.
Not enough description
If your MCA lender refuses to tell you in detail about your repayment terms. Additionally, you should ask them the requirements by which they decide the current average card sales, the monthly repayment percentage, the factor rate, and any other thing you are curious about.
Previous customer reviews
If you can’t find enough information on reviews from previous users, it could be a red flag. It’s always best to work with a trusted MCA lender, about which you can find testimonies or reviews online.
To fully enjoy the advantages of MCA lending, you need to choose the right one for your business. ComparedBusiness can assist you in choosing the right MCA lender in the UK.
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