However profitable a small business might be, there will come a time when it can do with some extra cash. It could happen during the start-up phase or during the phase of expansion. That’s when you will start getting overwhelmed by the loan options available to you. One of these options is a merchant cash advance.

Recently there was a story on the merchant cash advance series. You can read original here if interested. That said; let us understand what exactly a merchant cash advance is.

Unlike any other loan, merchant cash advance is a lump sum amount that you take in exchange for a portion of your future receivables. It is very common with restaurants and retail outlets that make a lot of money through debit and credit card receipts. Nevertheless, before you think of taking out a merchant cash advance, it is important that you find out if it is the right option for you. Here is what you need to consider:

The loan amount

Whether or not a merchant cash advance is the right option for you depends on the kind of amount that you need to run or expand your business. The amount that you can draw depends upon the capacity of the provider and the estimated total of your average monthly credit card sales. While this can be a great option for covering your short-term working capital needs, it is always better to go for a bank loan to meet your long-term requirements.

The MCA factor rate

This is the number that tells you how much you will have to pay back to your merchant cash advance provider. It is calculated by multiplying the factor rate by the cash advance amount that you borrow. For instance, if you have taken out $20,000 as merchant cash advance at a factor rate of 1.3, you will have to repay $26,000 in total. This rate depends on your credit score and your capacity to repay.

Retrieval rate

This will tell you how much of your credit and debit card proceeds you will have to let go of, in order to repay your lender. At the retrieval rate of 10 percent, you will have to pay $5000 for every $50,000 that you make through debit and credit card receipts. Of course this will be only until you pay back the loan.

Yellowstone Capital LLC is one of the best merchant cash advance providers to contact, if you are looking for some urgent cash in New York. If you feel this is the right option for you, don’t forget to read through the terms and conditions before signing the agreement.

Author's Bio: 

Narendra Sharma is a Freelancer Writer, Entrepreneur and passionate blogger. A writer by day and a reader by night.