If you break down the Merchant Cash Advance product, it’s limited in the dollar amount that can be advanced. Essentially MCA is a credit card with lipstick and driven mostly by calculated numbers and smart automation systems, not by lenders managing portfolios like a factor finance company or commercial lender.
Frustrations arise with MCA lines of credit, because a borrowers’ business account will be debited daily in most scenarios for an agreed upon payoff in 8-14 months. Your business is wired a lump sum and as agreed a large number is debited by the financier each day to reach your agreed payoff/payback date of terms. Principal pay back is not flexible and needs to happen quickly.
With factoring the lending lines are typically not capped at around $200,000 like with MCA and rather can be in the millions. Factoring repayment tends to be a little more flexible too. Repayment happens when your customer (the debtor) pays the outstanding invoice, not everyday like with Merchant Cash Advance repayment.
Both Factoring and MCA are filling a working capital niche and both have higher interest rates when annualized than say a traditional bank loan.
If your business needs immediate working capital to keep the doors open and your facing hardship or even just need immediate capital to increase your business operations, then factoring your accounts receivable invoices could be a viable solution for you. A line of credit based on your merchant sales may also be a business financing solution you want to pursue. Regardless of which type of business financing you choose, visit www.factorbid.com to get a few competitive offers from finance companies.
When finance companies know they’re competing for your business, you’ll get a few competitive offers and can decide which finance partner is best for your business needs today.