A merchant cash advance is a loan that a merchant can get from a company that specializes in lending to small businesses. The company pays off the principle and then takes a percentage of the balance owed on the account as repayment. The larger the percentage the more money the lender makes. You can get more information about how MCA works.
In most cases the payment schedule is once per month with payments coming in the form of direct deposits or pre-authorized credit card charges. While there are some who charge extra fees for expedited payments, there are others who work within their means.
For example, there are those who only charge interest on the original balance owed. In other words, the company does not charge any additional fees on the money that has been advanced. However, many of those that have this option opt for an extended repayment period.
This allows them to pay down the balance quicker while paying less interest over the course of the repayment period. This is a great advantage to consider for those who need the cash immediately.
There are other variables that determine how a merchant cash advance works. If you do not own a brick and mortar store you are still eligible for this type of financing. In order to qualify you will need to have a business line of credit. Many times those with poor credit will choose to get a small business line of credit to take their chance.
If they do not qualify, they may apply anyway for a traditional loan to help them repay what they owe. In either case the terms will be set up to meet the needs of the business.