Finding the right way to finance your working capital is the first and often most important step to taking advantage of short-term opportunities. This is especially true of public facing businesses like retail operations, restaurants, and entertainment venues because of industry-specific demands on those businesses as the seasons change. From inventory loadups to floor space redecoration, a merchant cash advance can provide that quick capital flexibly when you have a significant income through your merchant account.

MCA Basics

Like many cash advance products for business capital, the goal of the MCA is to provide a bridge that gives you enough money to meet today’s demands so you can make it to and through your next busy period. It’s ideally used right when you need the extra capital to prepare for a change in demand or a new marketing strategy, when you can expect business to pick up and the extra capital to provide you with the resources to meet demand. If there is a slight delay, the merchant cash advance repayment is tied to your credit card receipts, so it goes down when you earn less and up when business gets busy again.

What Does Approval Take for MCAs?

Since this is not a term loan or credit line and the lender is repaid directly from your merchant account, credit scores matter less to MCA lenders than to those offering other products. The approval is based on your total income and merchant account income, although there is a credit check and the score is considered in approvals. It is not emphasized the way it would be for a term loan, but it is still important, as is your current debt to income ratio. Some lenders also check out cash reserve levels when assessing an offer.

Managing Cash Flow With MCAs

Cash flow management can be tough if your business ebbs and flows along a seasonal cycle. It’s easier if you use a merchant cash advance to strategically manage your inventory and cash reserve levels. It takes some finesse, but with practice you can coast down to off-season inventory and staffing levels to reduce costs, then use the MCA to prepare for the demand shift so you can cover all your expenses without depleting reserve cash. A quick change in demand also sets the cash advance up for quick repayment. Reuse the strategy before each major seasonal demand surge and see how much easier it is to take advantage of high-volume sales periods.