As the name implies, a Merchant Cash Advance is an upfront cash advance that is received by a merchant in case he or she has temporary business credit needs and does not qualify for a bank loan. Many times, merchants of small and medium businesses experience a short-term cash crunch. Hence, to reduce liquidity crunch in the business, merchants opt for Merchant Cash Advance in India, popularly known as MCA or Point of Sale (POS) Loans.

Under this scheme, the business owner is eligible for a lump sum cash advance that he or she can repay with a portion of the daily debit or credit card transactions received by the concerned business.

Once the financial lender and the business owner reach an agreement under this scheme regarding the advance amount, term of the advance, holdback, and payback amount, they transfer the advance cash amount to the merchant’s account. The business owner must pay back the entire advance by remitting a predetermined percentage of the future card receipts, known as holdback, every day. Since the lender possesses the merchant’s account details, it does not require additional collateral, unlike other small business loans.

Features & Benefits of Merchant Cash Advance (MCA)
  • The repayment plan is decided based on daily collection at the Point of Sale (POS) machine in the shop. The fixed percentage of the daily collection is transferred to the lender account automatically. Such a percentage denotes a ‘Holdback Percentage’.
  • Even if loan repayment gets faster, the merchant does not get the advantage of the interest cost
  • Both the merchant and lender prefer this method because it aligns the repayment with the credit at the Point of Sale (POS) machine.
  • For the merchant, it gives flexible payment linked to the sales. For the lender, it is transparency linked to the POS machine’s bank account
  • As per the agreement between the merchant and lender, the automated and hassle-free repayment transfers the amount equivalent to the holdback percentage to the lender’s account.
  • Availing the Merchant Cash Advance does not require collateral. Since the lender can easily create the charge on the POS machine’s bank credits, there is no additional requirement for security or collateral
  • Since the MCA amount disburses very quickly, the system credits the loan amount to the merchant’s bank account almost immediately.
  • The application process to avail of Merchant Cash Advance is extremely simple and quick. Hence, you don’t have to prepare a bunch of documents and visit the bank multiple times to avail the funds.
What are the Eligibility Criteria for Merchant Cash Advance (MCA)?
  • The Applicant must have a good CIBIL/credit score
  • Should be into a stable business.
  • The lender decides a fixed percentage of annual turnover, as an eligible loan amount.
  • Merchant must have POS machine in shop or store
  • Lenders may ask for POS banks’ statements to ascertain eligibility.
What are the Documents Required to Avail Merchant Cash Advance?
  • Applicant’s KYC Documents – PAN Card, Passport, Aadhaar card, Voter’s ID card, Electricity Bill, Water bill, Driving License
  • Business Address Proof – Ownership agreement or Rent agreement of business premises, GST Registration, Business License
  • Turnover Proof – GST return of last 1 year Bank statement of the current account & POS machine’s account (last 1 year)
  • Additional Requirement – Details of existing loans and repayment status
  • Business Financial Document – Balance sheet, P&L Account, Income Tax Returns of last 2 years
How to Apply for Merchant Cash Advance Online?

Apply for a Merchant Cash Advance loan by below-mentioned steps:

  1. Visit the website to check the business loan options offered by financial institutions.
  2. Pick the deal and fill in the basic details like your name, mobile number, residence, loan amount, email address, annual turnover & profit, etc.
  3. After submitting the details, a customer care professional will contact you to verify the submitted details and to proceed with the discussion on the chosen loan deal.
  4. The bank will send your business loan application for further verification, and a representative from the bank will then contact you to proceed with the loan formalities.
  5. Once the bank approves your loan application, they will disburse the sanctioned loan amount to your specified bank account within the designated working days.
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