Finding short-term financing with repayment options that work for you and low capital costs can be tough. Traditionally, businesses use credit lines and business credit cards to manage a lot of short-term financing needs, but this debt can be quite expensive, especially for newer companies. Fortunately, your business assets can help you mitigate a short credit history by providing you with collateral that brings down the cost of financing. If your business counts on credit card transactions for a decent portion of its monthly income, the merchant cash advance is a great option. It may also be your least expensive choice, depending on how you use the money.

Borrow Against Future Transactions

Unlike traditional loans, MCAs are calculated based on your monthly income from electronic transactions like credit and debit cards. Basically, if it hits your merchant account on the way to your business checking, it counts as monthly income in an MCA calculation. Similarly, payment is expressed as a percentage of the receipts coming in until the advance is covered. There are also interest and sometimes financing fees, but a well-timed advance that is used to prepare for a major surge in demand can wind up paying for itself in a single month under the right circumstances. The key is understanding how much you need and how you will put it to use to get a return quickly.

When Is the MCA the Efficient Choice?

Every financial product has its own optimized use conditions, and the merchant cash advance is no exception. Monthly interest or other maintenance fees can slow down repayment, especially if business has yet to boom and you’re not making a lot of headway on the principal. Like any other installment-based financial product, the longer it takes to repay the more the capital costs. That means your best cost efficiency is when you time the application so you can put the capital to use immediately and see results soon after.

Using Varied Financing Sources

Every business needs access to extra working capital from time to time. If you’re not looking to dilute the ownership of current shareholders, then financing is often the best way to go, and the best financing is based on what you’re doing with the money. That’s why it’s a good idea to tap into efficient short-term solutions like a merchant cash advance when you need capital quickly and you anticipate a fast repayment. The cash comes quickly, and you don’t have to worry about the complex approval process involved in traditional loans. They’re mostly designed for asset investments like equipment anyway.