Case Study: How an MCA Can Solve Unexpected Problems

A merchant cash advance (MCA) is a financial service where a business can receive a capital advance in exchange for an agreed upon amount of their future sales. As with other loans, there are risks. But for many well-qualified lendees, an MCA can be your best financial option. Going further, there are a number of situations wherein and MCA can help you get out of a tight spot.

In 2011, entrepreneur Arturo Calderon believed he had all the financing he needed to get his Yucatan Taco Stand off the ground. He had acquired a 3,000-foot plot of premium real estate in Woodland, Texas with plenty of foot traffic and visibility. He was so sure that he was in the clear that he overshot his budget by $80,000- sucking the life out of his operating budget before the doors even opened.

Business was going well, just as he expected, but overcoming that $80,000 deficit was a major burden. After one month of scraping the bottom of the barrel for resources, he decided to take out an MCA.

The lender could see that Calderon’s restaurant was taking in more than enough debit and credit card transactions to pay off the $80,000 loan that he applied for. While more expensive than a bank loan, an MCA is designed to dispense cash more rapidly than traditional financial services like a personal loan. Fortunately for Calderon, the Yucatan Taco Stand was in a perfect position to benefit from such a loan.

For him, it was a match made in heaven. His business was positioned ideally to benefit from an MCA. While it’s true that this kind of loan is not well suited to every situation and business that might consider one- for organizations that are firing on all cylinders, such a loan can be just the thing to put them over the top.

MCAs are designed to work well for viable businesses that are experiencing a bit of turbulence. Your lender only needs to establish a good fit and you’ll be approved. Once approved, the capital will be sent to your bank account within 48 hours in most cases. In exchange for higher premiums, you also benefit from not placing your credit at risk. Again, the qualification standards might be stricter, but when it’s right, an MCA is like putting a turbo booster on your business. After the application goes through, you’re free to keep doing what you’re already doing well with the capital you need to make your customers happy.

It’s a popular option that more and more business are considering, especially as the economy continues to shift and change.

Melissa Thompson
Melissa Thompson writes about a wide range of topics, revealing interesting things we didn't know before. She is a freelance USA Today producer, and a Technorati contributor.