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What is a Merchant Cash Advance (MCA)?

Updated: Oct 10, 2022

Working capital loans are important to small business owners as funds allow small businesses to expand or at a minimum become nimbler than it currently is. However, small business loans, especially SBA and bank loans are not easy to get so many small businesses resort to easier options like merchant cash advances. In this article, we describe in some depth merchant cash advances. We also provide some implications and offer lower cost avenues to borrowing money for small businesses.

By Thomas Tramaglini, Managing Director at BRP Onesta About Thomas Tramaglini

Lack of Lower-Cost Options for Small Businesses

In recent articles I have provided an overview of the lower-cost options available for small businesses. Loans such as SBA loans are rare. For instance, in 2021 there were over 32 million small businesses in the United States and only a little over 12,000 SBA loans funded in the same year. That means, that the funding rate to small business is 0.00038%. That comes down to about 1 in 37,000 chance a small business would get an SBA loan.

These are not good odds for the typical small business owner, unless you are comparing to getting struck by lightning (1/114,195) or dying in an airplane crash (1/205,552).

Barriers in Place Make Sure Small Businesses