How to build credit with a Merchant Cash Advance

What are MCAs?

Merchant Cash Advance or MCAs are a type of business borrowing that is not like a standard loan. You (small business owner) borrow money based on your daily credit/debit sales or batch outs. The small business owner then makes daily repayments to the lender. You may read our post titled What are Merchant Cash Advances to learn more.

These payments are considered flexible since you are not paying the same amount every day. Instead, you will pay back a percentage of your daily batch outs to the lender. MCA is a product specifically designed with small business owner’s seasonal sales in mind.

Credit and MCAs

If you haven’t already, you should read our posts on how to build your business credit andhow to improve your business credit using private lenders. The purpose of this article is to zoom in on how MCAs positively impact your credit. If you haven’t, then the gist is that if you want to build your credit, then you must show that you can borrow and repay the money.

Below you’ll see why a Merchant Cash Advance is one of the best things you can do to build your credit. Let’s recap; there are three simple steps to building credit:

  1. Open a business bank account to separate transactions for easy tracking
  2. Borrow money to exercise your credit utilization
  3. Achieve explosive growth in your business with borrowed money

1. They are easy to track by both you and lenders

One of the best things about an MCA is that to receive one, you MUST have a business bank account and a POS system. Having a completely digital solution allows for seamless tracking between you, the payment processor, bank and the lender. Lenders can check your daily batch outs by connecting with the payment processor. Having an MCA provides the lender with the end to end tracking they require to assess your business sales activities completely.

2. The safest way to borrow and boost credit rating

Merchant Cash Advance is one of safest financing product available to Canadian small business owners. As long as your business is transacting and batching out, you will be able to repay your borrowed amount. This also means that on those weekends you close your business, you are not paying anything! MCAs work with your business’ ups and downs – you only pay when you get paid. In addition to representing a percentage of your sales, MCAs require no upfront collateral. Going with a merchant cash advance eliminates the requirement of paying a specific amount every month.

3. MCAs are directly attributable to business growth

In this case, if the lender has access to all of the information they need, you have a better chance of getting a fair assessment.  It’s just a click away for you to supply all of this information to the merchant cash advance lender. Since the lender can see your daily POS terminal transactions, they are better able to estimate and measure your current and future business growth. If your business has an increase in daily batch post-funding, then it’s an indication that you’ve used the funding to grow your business successfully. This shows the lenders that your business can turn a decent profit with financing.

Merchant Cash Advance is the best way to increase your credit

Merchant Cash Advances are the ideal financing choice for any business that has consistent daily debit/credit sales. They are designed to support your business’ ups and downs, instead of working against them. Since they are a daily repayment, it shows lenders that you are consistently on top of repaying your funding amount. MCAs are designed to be automated, and are set up to be entirely digital and hands off, allowing you to focus on your business.