What You Should Know About Merchant Cash Advance Companies

Merchant Cash Advance

Recently, merchant cash advance (MCA) companies have become even more prevalent, and have been marketing themselves to small business owners. Sometimes, they market themselves as a nontraditional factoring company. But, what exactly are they?

MCA companies provide short-term advances to companies in a wide variety of industries. Typically, there’s little paperwork involved, and within a day or two, an MCA company will deposit a lump sum into your bank account.

Important Considerations

Although it may appear to be a quick way to get cash, you should consider the following:

• MCA companies charge rates up to 30% or greater, more than quadruple the amount of factoring fees.
• Daily withdrawals from your bank accounts reduces cash flow.
• Unlike factoring, most MCA companies will not provide additional capital until previous balances have been paid in full.

Feature	Merchant Cash Advance (MCA)	Invoice Factoring
Repayment Frequency	Daily or Weekly automatic bank account withdrawals.	No daily payments. Settled only when the invoice is paid by your client.
Average Cost (APR)	70% to 300%+ (Crippling, short-term debt).	15% to 35% equivalent APR (Predictable, manageable fee).
Source of Capital	Borrowing against a guess of future sales.	Advancing money against work already completed.
Control of Bank Account	High Risk: The lender has direct ACH access to pull money out every morning.	Safe: No direct access to your daily working capital bank account.

Scale Bank POV

Most growing businesses don’t fail because they lack revenue.
They fail because cash can’t keep up with growth.

That’s where factoring wins:

• It scales with your business 
• It strengthens your cash position 
• It doesn’t hold you back with debt 

About Scale Funding

Scale Funding is a privately held financial services company founded in 1994. The company has operations in Calgary, with headquarters in Burnsville, Minnesota, USA. Scale Funding provides a full range of business financial services including: accounts-receivable management, asset-based lending, collection services, credit analysis, factoring services, risk assessment, treasury and more. The company is proud to be recognized for its reliability, flexibility, responsiveness, innovative products, customer service , and exemplary corporate citizenship. For more information visit Scale Funding on the web at www.tcicapital.com.