Shorter repayment terms are considered a disadvantage for business owners who are hoping for the maximum repayment period. While we mentioned earlier that repayment involves daily deductions over periods that range between 90 days and 18 months, the majority of lenders require business owners to repay their MCAs within six to eight months.
4. Limitations on business operations
MCA lenders need to protect themselves from business owners who try to cheat the system. Some business owners who have received merchant cash advances thought they were being sly by encouraging their customers to pay with cash instead of credit card. After all, without credit card transactions going through, no funds are held.
For this reason, most lenders will place limitations on how you operate your business. In some contracts, you are prohibited from discouraging your customers from paying with their credit cards, and you cannot offer special discounts for those who pay with cash. Another limitation set by MCA lenders is prohibiting business owners to switch credit card processing companies while they are still under the repayment period. In fact, some lenders will even specify in the contract that you cannot close your business, change locations, or take out a business loan until the MCA is repaid.
On the one hand, merchant cash advances appear to offer you a quick solution to your immediate funding needs. On the other, MCAs are one of the most expensive financing options available to business owners. They will fulfill your short-term needs but beware: they can also eat away at your cash flow in bigger chunks, making it easy to get into a painful debt spiral.
Some have gone as far as offering their customers discounts when they pay in cash
When choosing the right funding for your company, the fastest choice isn’t always the best choice, especially if it will cost you more in the long run. However, at Fundbox, we offer a solution that is incredibly quick, flexible, and transparent, with a flat repayment schedule.
You’ll be happy to hear that there is no paperwork involved and applying takes just minutes. With Fundbox, you can expect a credit decision in under 3 minutes* by connecting your accounting software or bank account to give us insight into your business. You might be eligible for credit up to $100,000. There are no minimum credit score requirements; the only hard and fast requirement is that your business must have been in operation for at least two to three months to provide us with sufficient data to make a decision, and use a business bank account.
Fundbox gives small businesses like yours access to credit in a snap. Repayment is made easy via auto debit over a 12 or 24-week period. You only pay when you draw funds, and each week, you simply pay back part of the amount you drew, plus a flat this fee. The amount you paid (minus the fees) becomes available again with each weekly repayment, similar to using a credit card. Pay us back early, and we’ll waive all the remaining fees.
Essentially, you get the same convenience of repayment as an MCA which automatically takes payment from you with every credit card transaction. With Fundbox, however, you’re not suffering under high retrieval rates. In fact, when you repay early, you can actually save. At Fundbox, fees are flat; the total fees you owe are divided evenly across the repayment period. Repay early, and you could save a lot!
Fees start at just 4.66% of the draw amount for 12-week repayment. You pay the fees in equal installments over the 12 or 24 weeks. While fees may vary from client to client, we are completely transparent with our pricing, and you will always see your weekly repayment and fees before you draw.