FAQs
Merchant Cash Advance
MCA is the acronym for Merchant Cash Advance. A Merchant Cash Advance (MCA) is funding for business owners who need immediate access to working capital as a flat fee cash advance. Merchant Cash Advances are lump sum payments made to a business. The business agrees to pay a percentage of future credit cards, debit cards or cash sales. Companies use MCAs as an alternative to a traditional loan.
An MCA is not a loan. An MCA buys a portion of future sales from a merchant. So, MCA transactions are not subject to state usury laws limiting the interest rates lenders can charge.
Investors in Merchant Cash Advances typically see a higher return than traditional small business loans and publicly traded investments. With a shorter term (usually less than a year but frequently as short as 90 days), investors have their capital returned more regularly and much faster. Plus, returns are not dependent on public equity and credit markets.
It all begins with an application from a merchant looking for funding. Underwriters examine the merchant’s financial statements to verify the company’s current financial situation. Once verified, investors on the BIDMCA platform view that application and make an offer to the merchant to supply funding for the company. The application process is typically more relaxed than a traditional commercial loan, but the process still thoroughly considers if the merchant can meet the repayment terms.
Merchant Cash Advances are usually approved and funded very quickly, often within 24 hours. So, investors may apply a higher cost of capital that balances the risks and potential returns. Also, there is no secured asset when purchasing future receivables.
Typical default rates have been between 8.5% and 10.5%.
Business owners use MCA funds at their discretion based on the needs of the company. Many buy inventory, purchase new equipment, or expand. Merchant Cash Advances are not typically offered to businesses to make payroll, pay their rent, or pay down other debts.
Some users report returns more than 60% annually but returns vary based on the risk profile provided in the onboarding process. Past returns do not dictate future performance.
Yes, investors don’t see remittances until they provide the funds for their portion of the deal.
Over 95% of all merchant cash advance deals involve a facilitator or broker who could make up to 15% profit by marking up the cost of capital from the funder to the merchant. At BIDMCA, we participate in every deal funded on the platform, so we have a vested interest in the business and in the successful repayment of the advance.
Our partners place a dollar amount bid on the right to the future receipts of the business, with specified terms.
Our proprietary algorithm accepts bids comprised of the 3 different components in a merchant cash advance.
- 1.Dollar amount
- 2.Term or length of time
- 3.Factor or cost of capital
Using the dollar amount as the primary variable, the algorithm compiles all bids weighted by the highest amount bid, with the term and factor being secondary and equal. This combination ultimately translates to the best possible terms available to the merchant.
To get started on BIDMCA, complete the investor application. Once your accredited investor status is confirmed, you’ll receive your account access information by email.
You can ACH or wire your deposit directly into your account.
You can withdraw your cash balance by ACH or wire instructions. Withdrawals typically require 24 to 48 hours to process. Any balance currently funding deals cannot be withdrawn until the merchant pays off the deal.
Any balance not funding an investment is simply held in your account.. You can always withdraw your cash balance.
No.
Investments are matched based on the risk profile criteria you provided. You are automatically matched with deals using those criteria, so deals can fund quickly, often within 24 hours. You will have an “opt-out” window if you prefer to not participate in an individual, specific matched deal.
No, BIDMCA does not allow allocations to an investment before we internally make a commitment.
For more details about any investment opportunities, please contact us.
The sky’s the limit! Invest as much as you would like.
Absolutely! The Family Office sign-up process is the same. You decide if you want to create individual accounts or use a master account.
The SEC describes Accredited Investors as any individual, couple, or business entity that matches any of these requirements:
- 1.Earns at least $200,000US annually or a spousal equivalent of $300,000/ year
- 2.Has assets of $1,000,000+ excluding your primary residence
- 3.Owns an entity (such as a family office) with at least $5,000,000 in assets
- 4.Currently holds a series 7, 65, or 82 license in good standing
