Merchant Cash Advance Potpourri: Why It Beats Traditional Lending, the Downside, and How to Choose

The merchant cash advance has gained notoriety as of late, particularly in these challenging economic times. While the requirements to obtain an MCA are tightening, this financing vehicle still holds the edge over the traditional loan.

Increasing Criterion Make MCAs More Challenging to Get
Small and mid-sized business looking for financing via merchant cash advance will be met with additional hassles. According to a report from Access My Library, merchants experiencing the difficulties of inflation and available credit are passing them on to potential customers. However, merchant cash advances still hold all of the benefits that made them popular in the first place: no APRs, no down payments and no collateral.

MCAs Still Trump the Traditional Financing Options
Francisco J. Acosta, Executive Vice President of Internal Business Consulting, emphasizes the power of the MCA over traditional lending. Acosta reveals the following big bank policies that make borrowing difficult:

• Banks loan money based largely on FICO score; anything under 680 usually results in a decline, a rate that is up to 98%
• Banks demand repayment on a fixed schedule; miss a payment and interest rates will go through the roof
• Banks typically will not lend you any more money during a repayment period

How to Choose a Reputable MCA Lender
Los Angeles Times blogger Karen E. Klein advises several tactics for choosing the right merchant cash advance vendor. Her top suggestions for picking correctly include choosing a strong franchise brand and reject any offers that require an application fee of any kind.

You can get more management advice, including financing support and direction, from AllBusiness. "Managing in the new millennium: managing in an economic downturn" discusses the challenges facing CEOs and why a merchant cash advance may be one piece of the puzzle.