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What does the average MCA borrower in New York look like?

On Behalf of | Jan 12, 2024 | Merchant Cash Advances

Merchant cash advances might seem like another version of a small business loan, but an MCA is not appropriate for businesses of every industry, size and financial situation in New York. So, what businesses are most likely to end up with an MCA?

Lots of credit card transactions

As the name suggests, a merchant cash advance is not a loan. It is a lump-sum advance of money. In exchange, the debtor agrees to pay the MCA provider a certain amount out of their proceeds from credit and debit card transactions. Thus, businesses with customers who often pay with credit cards, such as restaurants, bars and convenience stores, tend to be more attractive to MCA companies.

Imperfect or no credit

With interest rates still high, it can be very hard for a business with less-than-perfect credit to get approved for a traditional loan, at least at affordable rates. Similarly, a new business that has not established a credit history could also struggle to get a loan at a bank. An MCA, with its easier access, could be the only way for a business owner in this situation to get a cash infusion.

Needing cash now

Finally, a business that cannot wait for a traditional loan application to be processed and approved might turn to an MCA, which often can process an application more quickly. For example, a business might need to repair or replace an expensive piece of equipment or hire several new employees at once.

When an MCA is threatening your livelihood

Whatever your reasons for taking out an MCA, if you are struggling to repay and the MCA company is threatening to seize assets, legal advice might be necessary to keep yourself in business.