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What options can be alternatives for MCAs?

On Behalf of | Apr 30, 2024 | Merchant Cash Advances

Obtaining a merchant cash advance (MCA) may seem like the right decision to address your business’ funding needs. It is a straightforward way to access immediate financial resources with minimal requirements and flexible repayment arrangements. However, this option can come with disadvantages too, such as little regulation, unpredictable interest rates and high risks, considering that the repayment amount’s basis varies according to day-to-day earnings.

Because of these factors, MCAs are often a last resort, becoming applicable in dire situations. Without sufficient planning and management, the borrower may bite off more than they can chew, forcing them into a cycle of debt. If you need additional funding urgently and you have a good credit score or business history, using the following MCA alternatives could be more beneficial:

  • Getting a business credit card – This option could be ideal for urgent needs but usually has significant fees. Despite these costs, they can still be less expensive than an MCA, depending on the situation.
  • Applying for a business loan – A loan for small businesses can have more reasonable terms and features but could take time for the amount to reach your account. It also has requirements that may impact the application’s outcome.
  • Utilizing invoice factoring – This type of invoice finance allows the business to sell outstanding invoices to another party, which can help you receive funding urgently. However, it might only be as effective as the cash flow’s reliability and stability.

Other choices can also be viable based on your circumstances and financial status, affecting eligibility and qualifications.

Considering MCAs only if necessary

Sometimes, people choose MCAs without fully understanding how they work. By doing so, they may end up passing on equally helpful options with more advantages. Before considering an MCA, seeking experienced advice can be helpful for deliberating efficiently and making informed decisions.