Merchant Cash Advances Finally Becoming Mainstream

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The merchant cash advance product is finally becoming a mainstream product after 10 years. When American Finance Solutions started over four years ago this was definitely no the case! We spent most of our time explaining the product and educating business owners.

Over the past two years the MCA product has continued to gain popularity out of necessity. American Express recently published an article on its website highlighting several "alternative" financing products including: equipment lease back, traditional factoring and micro loans.

Most clients use the MCA as an alternative to a credit line that they used to get at their bank. Many people have questioned if the merchant cash advance is really an extended version of a credit line. Technically it is a factoring sales contract, the business owner is selling a portion of his credit card receivables at a discount. So the cost is strictly the discount that the business owner agrees to up front. An interest rate cannot even be calculated since the time period for collecting on the contract is open ended.

Yes, many clients use the product in lieu of a traditional credit line. Even when liquidity returns to the banking system, many clients will still opt for the MCA for its ease of accessing funds and payback method that is directly tied to the clients cash flow.