Finding Bad Credit Business Loans During the Holiday Season


Merchant cash advances, or MCAs, are a form of business funding in which a cash advance provider pays upfront for a percentage of a company’s future credit and debit card sales. Because they’re by definition not loans, MCAs function very differently and are subject to entirely separate laws and regulations.

When your company receives a merchant cash advance, it makes payments by setting aside a certain percentage of each and every card-based transaction, typically around 10% of the total. The more card transactions your business processes, the more you pay.

That means in slow times, you’ll make smaller and fewer payments. The opposite is also true. When business is booming, you’ll make extra large payments to an MCA provider.

Unfortunately, there’s no advantage to quick repayment. MCA providers make money by charging a factor rate, typically a number between 1 and 2. Multiply the factor rate by the size of the MCA, and you’ll find the amount of money the MCA provider is owed in total.

For example, if you receive an MCA of $5,000 at a factor rate of 1.2, you’ll repay 5000×1.2, or $6,000.

Paying back an MCA quickly can lead to effective annual percentage rates (APRs) in the triple digits, so seek an MCA to fund your holiday expenses only if it’s absolutely necessary. But they may be your best option with bad credit. Because repayment depends on the volume of your transactions, your credit history is of less interest to MCA providers than it is to traditional lenders.

On top of that, the application process and funding of an MCA is typically very fast. You can typically receive an offer within a single business day.

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