MCA vs. Loans: What Is a Merchant Cash Advance and IS It Right for Your Craft Business?

Your hands are full between managing staff, running a business, and ensuring the next guest is as satisfied as the last. Now, when it comes to financing your business, some solutions make your workload lighter. 

Arryved Capital gives eligible businesses quick cash without a traditional application or underwriting process. It empowers you to run your business how you see fit with accessible money in the bank!

Keep reading to learn more about Merchant Cash Advances and which businesses they’re best suited for. Plus, walk through the simple application process and see if it aligns with your needs!

What is a cash advance? How is it different from a loan?

A cash advance is a method of financing that provides a lump sum of money to a business in exchange for a percentage of future sales. It’s also called a business cash advance, or in your case, a merchant cash advance. 

Cash advances benefit businesses with seasonal revenue fluctuations because they improve cash flow. Arryved Capital is used by craft food and beverage businesses to cover expenses like payroll, rent, machinery, and supplies.

So how is a cash advance different from a loan? Here are some more key differences between the two financing options:

• Payment: Cash advances are paid as a percentage of future sales, so payments depend on revenue. Traditional loans have fixed monthly payments with set interest rates. 
• Credit Check: Cash advances can require less rigid credit checks. Loans can require several evaluation steps, including credit checks.
• Flexibility: Cash advances offer payment flexibility. Traditional loans have strict repayment terms.

Craft businesses benefit the most from merchant cash advances

Because of the flexibility and quick nature of cash advances, they can be best for businesses seeking short-term funding. The fast cash flow is a game-changer for businesses with immediate expenses. 

You can see why craft food and beverage businesses turn to cash advances during seasonal ebbs. Extra cash helps cover expenses in the colder months when traffic is low. On the other hand, extra cash also helps maximize revenue when business is booming in the summer! For example, investing in an extended patio in June sets your business up for many profitable months ahead. 

How cash advances work for food and beverage businesses

If merchant cash advances have your ears perked, let’s walk through the process step-by-step!

1. Research your options: Ask your point of sale (POS) provider what short-term funding options they have available. Arryved Capital gives eligible craft businesses quick access to cash based on sales history.
2. Complete the easy application: Answer a few questions about relevant business information. Don’t worry—no credit checks, collateral, or complicated paperwork is required!
3. Review your offer: If your application is approved, you’ll receive a cash advance offer. Carefully review the offer’s payment percentage and estimated timeline.
4. Sign the agreement: When everything looks good on your end, sign and accept the agreement.
5. Receive your funding: Sit tight while the green makes its way to your bank! 

Pretty simple, right? Please note: Cash advances are NOT loans. Payment for cash advances fluctuates based on your sales volume!

Your provider should clarify anything you need regarding the agreement. Ask all the questions you have so you can reinvest in your craft business with confidence. 

Terms you should know about merchant cash advances

There is some basic vocabulary you should know before approaching your POS provider about an advance.

• MCA is an acronym for merchant cash advance. 
• Eligibility is the criteria that determine whether a merchant qualifies for an MCA based on factors like sales history.
• Advance Amount is the total sum of money provided upfront.
• Capital Fee is the one-time fixed service fee associated with the cash advance, calculated based on the offer size, estimated duration, and business performance. This fee is included in the total payment amount. 

Now that you have a good foundation for what merchant cash advances are and how they work, it’s time to break down the pros and cons of this funding opportunity. 

Pros & cons of merchant cash advances

Is an MCA right for your craft business? Let’s dive into the advantages and considerations. 

Advantages of merchant cash advances:

• Everything about MCAs is fast: It’s easy to apply, get a credit decision, and receive cash promptly if approved. 
• No collateral is necessary for an MCA.
• Payment is flexible and based on your sales performance. 
• Enjoy zero impact on your credit score. 
• Whether it’s some shiny new equipment or inventory for a collaboration brew, use MCAs for short-term business expenses. 

Seeing all green lights? Before you get the ball officially rolling, here are a couple of things to consider: 

Consider the impact on your cash flow. Monthly payments for merchant cash advances are proportionate to sales, so keep in mind any constraints you might have. 

Consider when you need the actual cash. Merchant cash advances are best suited for short-term, seasonal needs. Try exploring other options if you need long-term financing.
Help your business thrive in every season with Arryved Capital.