One way to bypass the issue of a poor credit score is to instead go after a merchant cash advance, or MCA. Merchant cash advances aren’t loans. Instead, a company purchases a percentage of your future debit and credit card sales.
Instead of an interest rate, you’ll pay a factor rate, in which the size of the advance is multiplied by a number typically between 1 and 2. That total will be the amount you need to repay. If you get an MCA of $8,000 at a factor rate of 1.4, you’ll repay a total of $11,200.
There are benefits and drawbacks to MCAs. Firstly, you won’t make monthly payments. Instead, you’ll make payments on your MCA every day. That means that if your company has a slow day or week, you’ll pay less. And when your company is making many transactions, you’ll pay more.
If you do end up paying an MCA back quickly, your annual percentage rate, or APR, will also be very, very high. With most loans, you’ll pay less in interest as the principal shrinks. Not so with MCAs. That $11,200 is the total repayment amount whether you can pay in three months or four years.
But of all non-line of credit forms of borrowing, merchant cash advances might have the shortest time for getting funded. MCAs sometimes deposit within a single business day, meaning that if you need to have cash very quickly, they’re a good option.