Merchant cash advances (MCAs) are quick funding solutions small business owners can obtain based almost exclusively on their credit card sales. Once approved, the lender will deposit the advance into your business checking account in one lump sum. In turn, the cash advance provider will receive a percentage of future credit card sales until you fully amortize the loan.
This raises some questions, which is why this article examines the latest industry trends and statistics surrounding cash advances to offer valuable insight into the current business borrowing landscape. Toward the end, we will also explore a few popular alternatives to merchant cash advances to give you a better sense of the wider range of alternative financing options.
The Latest MCA Market Trends
Merchant cash advances have experienced significant growth in recent years, with the market estimated to be $19 billion in 2021. This figure marks a substantial increase from $8 billion just five years ago. The considerable uptick in MCA loan origination underscores the growing popularity of this financing option among small businesses, and many analysts expect this segment to only continue expanding.
According to a study conducted by the Federal Reserve, the approval rate for merchant cash advances in 2020 was an unprecedented 84 percent. This statistic further evidences merchant cash advances as one of the most favorable lending options for small businesses, with approval rates closely rivaling those of equipment loans. In contrast, traditional business loans have a much lower approval rate at only 57 percent.
Interest rates for merchant cash advances have been consistently decreasing, as well. MCA rates are finally starting to compete against the more conventional lending solutions. However, the actual interest rate you’ll receive depends on several factors, including your sales, credit history, length of operation, and location. In addition, rates and fees can vary considerably from lender to lender, so researching and selecting the right MCA provider are essential.
Thanks to increased industry regulations, New Jersey small businesses are better protected against predatory practices that once stigmatized MCA loans. Nonetheless, even with the added oversight, exploring all your financing options before accepting a merchant cash advance offer remains important.
Despite the regulations, bad-faith actors can still find ways to target and exploit unsuspecting business owners. Nevertheless, after practicing due diligence during the lender selection process and comparing multiple offers, there’s no reason why you can’t benefit from a merchant cash advance in NJ.
One of the key advantages of MCAs is the streamlined application process that can facilitated in person or online. Depending on your business’s financial health, in many cases, you can expect to have funds deposited into your business bank account in as little as 24 hours after applying.
Of course, this processing time starkly contrasts the often time-consuming and complex application process associated with traditional bank loans. This speed and simplicity can provide small businesses with the immediate funding they need to seize opportunities or address urgent financial needs.
Perhaps the most attractive feature of merchant cash advances is that they do not require businesses to sell their equity in exchange for funding. Instead, the lender will collect a specified portion of your credit card sales until you fully repay the debt. This arrangement allows you to maintain full ownership and control over your operations while still benefiting from the capital injection you need.
Merchant cash advances have undoubtedly become a popular financing option for small businesses in recent years, with a significant increase in market size and a high approval rate. The declining interest rates, coupled with improved regulations, provide companies with more favorable terms and enhanced protection against predatory lending practices.
The streamlined application process offered by alternative small business lenders ensures quick access to funds, and your company can secure financing without sacrificing equity or staking valuable assets as collateral. After conducting a thorough research assessment to find the right provider, there’s no reason why you shouldn’t encounter a favorable merchant cash advance agreement to help you meet your objectives.
Popular Alternatives to MCAs
If you’re unsure if an MCA is right for your application, you’ll encounter several viable alternatives to merchant cash advances that could be better suited to your requirements. One such option is invoice financing. This type of funding involves selling your accounts receivable to a third party at a discount. Invoice financing can provide your business with immediate cash flow, allowing you to access funds that would otherwise be tied up in unpaid invoices.
If your business is in need of new equipment, equipment financing may be a viable solution. With this type of financing, lenders will provide you with a loan specifically for the purpose of purchasing new equipment. The equipment itself serves as collateral for the loan, making it an attractive option for businesses looking to upgrade their industrial machinery.
For established small businesses with a track record of decent and steady sales, a business line of credit could be a good fit. This type of financing provides you with a revolving line of credit that you can draw from as needed. It can be a flexible solution for managing cash flow and meeting short-term funding needs.
In addition to these options, it is also worth exploring other small business lending options like government grants and SBA loans. The Small Business Administration, or SBA, is a valuable resource for finding information on these programs, but loan processing times can be lengthy.
Key Industry Statistics About Merchant Cash Advances
Metric | Statistic | Year | – Notes |
|---|---|---|---|
Market Size | $19 Billion | 2021 | – Up from $8 Billion in 2016 |
Approval Rate | 84% | 2020 | – Federal Reserve Study |
Average Interest Rate | Varies | 2021 | – Depends on multiple factors |
Traditional Business Loan Approval Rate | 57% | 2020 | – For comparison |
Time to Funding | As little as 24 hours | 2021 | – Streamlined application process |
Regulatory Oversight | Improved | 2021 | – New Jersey regulations protect against predatory practices |
Getting Approved for a Merchant Cash Advance in New Jersey
In light of these recent trends, it is crucial for businesses to explore all their lending options and find the solution that best meets their needs. New Bridge Merchant Capital is committed to providing personalized lending solutions to businesses of all sizes across virtually every industry.
Whether you are a small startup looking for funding to grow your business or an established company that needs to supplement its cash flow, New Bridge Merchant Capital has the expertise and resources to help your business thrive.
Reach out to one of our experienced business lending consultants today to discuss your requirements and explore all your available borrowing options. You can also conveniently apply online to start the loan process now or give us a call at 844-228-0593. Don’t miss this opportunity to jump-start your business with the extra working capital it needs to succeed.
