How you can benefit from a Merchant Cash Advance

Nov 28, 2016
Author: Ean Barnard

In September, we made a happy announcement that the Fincheck Business Finance Platform is in full swing! We saw rapid growth on our B2C platform over the last couple of months and our free comparison tools for various B2C finance products have gathered heaps of positive feedback. But, one of the most critical questions we've received, has been about the need for business finance products.

In the words of our CEO, Michael Bowren, "Capital and financing are vital for a small business to scale. We found that many small business owners are taking out personal loans to finance their businesses because they don’t know that other options exist. This tends to put a business poised for growth into survival mode and seldom leads to its expansion and sustainability."

“SME's are supposed to be the drivers of South Africa’s economy, but the hurdles they face when it comes to accessing not only finance, but reliable information about finance, are significant.”

We took this heart and so, Fincheck Business was born! You can now access Fincheck Business Finance and compare business finance products like:

It's as simple as always to browse and choose products with the Fincheck Comparison Tool. In our Fincheck B2B launch post, we showed you an infographic as a reminder on how it works.

Today, we're having a simple look at how a Merchant Cash Advance can benefit your SME.

What is a Merchant Cash Advance Loan?

A merchant cash advance (MCA) is a form of finance in South Africa that falls within the debt or factoring financing sector. Although it is not technically a loan, it allows businesses to get much-needed funds for cash flow purposes, etc.

It is used to improve cash flow for a business and make business operations possible. The business receives a certain agreed upon amount from a provider in exchange for future credit and debit card receivables. The MCA provider basically 'buys' the future receivables with an immediate amount that is paid to the business, and a certain percentage of the business credit and debit card receivables go to the MCA provider until an agreed amount is paid back to them. See below for an example of how a MCA transaction works.

Who is a Merchant Cash Advance For?

The merchant cash advance is, generally speaking, for a merchant or business that needs working capital to keep their business running smoothly. This need typically arises because of a quiet season in trade, unexpected costs or even a total economic downturn that impacts trade. It allows you access funding to expand or renovate operations without affecting your current cash flow. It allows you cash to invest in revenue generating activities like marketing, additional stock.

How A Merchant Cash Advance Works

A Merchant Cash Advance can sound unnecessarily complicated if it's a service you haven't used before, but are interested in trying out. Here is a simple breakdown of a MCA in the form of an example.

  1. Business or Merchant X needs R10,000 to continue business operations in the quiet season of their industry
  2. They choose to apply with MCA Provider Y for the merchant cash advance of R10,000 that they need
  3. MCA Provider Y will need to approve the application and then they supply the R10,000
  4. MCA Provider Y now has a right to receive card payments from Business or Merchant X until an agreed upon amount (according to the contract) has been fully received by MCA Provider Y
  5. These payments will be a percentage of the debit and credit card sales
  6. MCA Provider Y will also charge a processing fee that covers all processing aspects and documents of the merchant cash advance

Visit the Fincheck Merchant Cash Advance page and scroll to the bottom to learn more about this form of finance. You will learn:

  • How to qualify
  • How you can use the funds
  • The difference between a Merchant Cash Advance and Debt Factoring
  • Documents that are required
  • Advantages and Disadvantages

We would like to encourage all Fincheck users to share this resource with their peers! We need your help to help businesses make better financial decisions! 

Following this post, we'll further break down the components of business finance and loans. If you would like to stay updated with the latest post, fill out the form through this link and you'll get a shout when we're live with our next post on Unsecured SME Loans.

Thank you for using Fincheck, we're excited about your financial future!

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Fincheck is a financial comparisons website that organises information to assist the borrower in making their best financial decision.

Fincheck gathers information from numerous banking partners and presents it to the borrower in a simple, understandable way. Lenders benefit from an additional market place and extensive customer reach. Loan amounts vary from lender to lender. Fees, interest rates, loan amounts and credit scores influence the repayment terms. Lenders require personal details to control their risk and assist the government to combat theft, money laundering, terrorism. Fincheck does not endorse any particular product or company. We are an independent company. The information shown and provided is an opinion, based on numbers and must not be seen as advice or consultation.