When your business cash flow doesn’t quite match your funding needs, a merchant cash advance (MCA) can help you quickly get back on track. The flexibility and speed of funding can make MCAs attractive to business owners, but as you evaluate your options, you’ll likely be wondering, “How much cash advance can I get?”
It’s a crucial question, especially when quick decisions can have lasting impacts. Luckily, it’s fairly easy to estimate your MCA eligibility and advance amount with a merchant cash advance calculator. Here’s what you need to know.
What is a Merchant Cash Advance?
A merchant cash advance is a unique form of financing that is appropriate for small and mid-sized businesses (SMBs) that have a high volume of credit card sales. Unlike traditional business loans, which typically require fixed monthly payments, MCAs provide businesses with a lump sum of upfront cash in exchange for a portion of their future credit card sales.
While business loans tend to require an in-depth credit evaluation, MCAs are based on credit card sales, making them accessible to business owners who may have less-than-perfect credit. Since the payments are directly tied to credit card sales, MCAs also provide the flexibility that many businesses need. If you experience a surge in sales, you’ll repay a greater amount, and when sales slow, your payments will go down as well.
Key Factors Influencing Your Cash Advance Amount
The answer to the question, “How much cash advance can I get?” depends on several key factors. Each of the following variables plays a critical role in determining the maximum amount of cash an MCA provider can offer.
1. Credit Card Sales
Your average monthly credit card sales are the primary factor that determines the amount of cash you’re eligible to receive. Higher sales volumes typically translate into larger advances, since this indicates a greater ability to repay the advance. The amount you’re eligible to receive is typically based on a standard percentage of this average.
2. Factor Rate
The factor rate for an MCA is similar to the interest rate on a traditional loan. This can vary and is based on the perceived risk associated with your business. Your factor rate is a multiplier that is applied to your advance amount. For example, if the factor rate is 1.3 and you take out an advance of $10,000, you’ll repay $13,000 in total.
A low factor rate can translate into a higher advance amount, since you’ll pay fewer fees and have a lower total repayment. Conversely, higher factor rates may limit the amount of cash you can access. For example, if a lender is willing to extend a total repayment of $20,000 and uses a factor rate of 1.4, your maximum advance would be around $14,285.
3. Repayment Period
The term over which you plan to repay your advance can also play a role in the amount you receive. A longer repayment period may allow you to access a larger advance upfront. However, keep in mind that this may also impact your factor rate, which increases the total cost of the advance.
4. Lender’s Cash Advance Limits
Each MCA provider has its own set of guidelines that determine its minimum and maximum advance amounts. These limits are based on their assessment criteria and risk tolerance. It’s common for maximums to vary from one lender to the next, so if one provider doesn’t offer as much as you need, it may be helpful to shop around.
Estimating Your Eligible MCA Amount
MCAs can play a significant role in boosting working capital for SMBs, but before you initiate the process, you’ll want to have an idea of just how much cash you can access. Using a merchant cash advance calculator, you can quickly estimate your advance amount, monthly payments, and total cost. To get started, you’ll just need to enter your estimated monthly credit card sales, your desired repayment term, and your factor rate.
You can adjust these figures to see how changes to the variables will impact your cash flow and advance amount. You can also use an MCA calculator to compare offers, helping to ensure you’re getting the best merchant cash advance for your needs.
Explore Your Merchant Cash Advance Options
Whether you’re ready to take out an MCA right now or you’re just considering your options, using our MCA calculator will help you make informed decisions. When it’s time to take the next step, our experts are here to help. Contact us at (714) 500-6622 to learn more about your options. You could qualify for up to $250,000 in just 24 hours.
