Merchant Cash Broken Down In Details

Author

Ryan Chen
January 22, 2025

In partnership with

Hi there,

Welcome to Loancater’s weekly newsletter. This is approximately a 4-minute read.

In today's newsletter, we’re going to go over the mandate for MCA lenders 


We are going to go over…

  1. What a MCA(Merchant Cash Advance) is

  2. Why most clients borrow cash advances 

  3. How the MCA funders price their deals (link)

Schedule a FREE strategy session with us here (link) or apply here (link) for a business loan.

Actionable Tips

Most SMB are not savvy with their finances because they are too busy handling the day to day of their business. 

As a result they borrow multiple MCA or short term funding without gaming out the outcomes.

Use this profit calculator to see the true cost of capital (COC) of taking a cash advance to see if it makes sense (link).

👁 Credit Report Course Here

Check out this free credit repair guide that’s better than most $500 companies (link)

💰 Loancater’s Application

Get the best business loan in the market here (link)

✔ Clients Who Worked With Us In The Past

See previous business owner who were happy to work with Loancater (link)

⭐ Different Type Of Loans

Type of funding product available in the market (link)

What A MCA(Merchant Cash Advance) is

A Merchant Cash Advance is a short term business “loan” (Dress as a purchase of future receivables) that is an instrument price at 30-50% over the initial borrow amounts with daily or weekly payment typically between 12-52 weeks.. Typically the lenders of these instruments are a group of individuals or a family office (private credit). These deals work when you measure the cost of capital and all in all your return on capital is greater or when you're looking to fix an immediate situation like missing payroll. Do not borrow MCA when you make less money than you pay back (we saw this happen frequently with newer business operators). 

MCAs are also broken down into tiers from A paper, B paper, C paper etc. The higher up you go in the alphabet the more MCA you have taken out and the higher the rates.

When being underwritten, the biggest contribution factor is your monthly revenue over the last 3 months AND your payment history with another lender. (the more positions you have the less favorable you are. If you are a default then most lenders will avoid you). The other factor is how much ADB you have (Average daily balances) which should be at least 3% of your monthly revenue and your credit score.

Why our clients borrow cash advances 

Most of the business owners we deal with who take out cash advance are doing so for 1) Writing it off on their taxes 2) Rectifying an immediate concern like payroll or a vendor payment 3) Bridging a short term opportunity where they may or may not have a higher profit margin but they definitely have a higher return on their capital. (Profit margin, ROI, are all not as important as your return on capital. How much you make when everything is said and done).

How the MCA funders price their deals (link)

This is just an inside look on how a cash advance lender prices their deals out. Most MCA lenders are also a small business and their models aren’t complicated. That link will give you access to most MCA lenders funding 1-3M a month.

How I Can Help You

If you like this newsletter and want to work with me, there are a few ways we can do so:

  1. You can apply for a business loan here (link)

  2. You can apply for credit repair by emailing [email protected] “I want credit repair”

  3. You can apply for a free 30 minute strategy session for credit card processing & ACH  here (link)

Or,  you can reply to this email.

I reply to absolutely everyone.

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