An MCA is a financing option where a business receives a lump sum of cash in exchange for a percentage of its daily card payment sales. Repayment is made by deducting a fixed portion of daily card transactions.
MCAs provide quick access to capital, are available to businesses with lower credit scores, and offer flexibility in repayment since it's tied to daily sales. Collateral is typically not required.
MCAs can be expensive, with high fees and factor rates, which can result in a significant cost of capital. The daily repayment structure can also strain cash flow during slow sales periods.
MCAs have more relaxed eligibility requirements but are usually approved faster than traditional loans. However, traditional loans may have lower overall costs.
MCAs can benefit businesses with irregular sales patterns because repayments are tied to daily card sales. This provides flexibility during slow periods but can be costly.
Businesses should weigh the cost, repayment structure, and their current financial situation when considering an MCA. Alternatives include traditional loans, lines of credit, or seeking investment from investors.