The Pros and Cons of Merchant Cash Advances In the 1990s, a Connecticut businesswoman named Barbara Johnson found herself in a pinch : She wanted to launch a summer paign for the Gymboree Playgroup & Music franchises she operated but she didn’t have the necessary funds. Instead of giving up on the idea, Johnson got creative. She knew that parents would be bringing their kids back for classes in the fall and wondered whether she could borrow against those future revenues. This was the genesis of merchant cash advances (MCAs), a form of small business financing that enables companies to put their future credit card receipts to use today. Today, MCAs are typically used by companies that process high volumes of credit card transactions. According to a recent report , the market for small business MCAs that hauled in $8.6 billion in 2014 was expected to grow to $15.3 billion in 2017, with no sign of slowing down. This is not because MCAs are the “best” financial products for small businesses, though. Since the 2007–2008 financial collapse, banks have been less and less inclined to lend money to small businesses. Yet a majority of small business owners deal with cash flow challenges each year. Instead of turning to banks, these business owners were forced to look for other options. Many of them turned to MCAs because they are a quick and easy form of financing. Does that mean they are the best option for your business? To help answer that question, let’s assess the pros and cons of this type of small business financing. Pro #1: Fast funding Merchant cash advances are one of the fastest forms of small business financing available. The application process is a cinch; you usually just need to submit a few months’ worth of credit card and bank statements. If you apply online and are approved, money can be in your business’ bank account in as fast as 24 to 48 hours. […]
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