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Covid-19 and MCA funding for SMEs

By Scott Schrade,

COVID-19 has affected everyday life greatly. Every country has put emergency lockdown measures in place, and it has caused a huge dramatic impact on small and medium businesses. With the stay at home or quarantine orders, the sales of SMEs have dropped greatly especially for the businesses engaged in non-essential goods. Thus, COVID-19 has virtually eliminated trade and commerce everywhere. The emergency response to this novel virus has put small businesses in existential crises.

Small businesses often have less cash available on hand that make them drown at the face of any financial shock. With the COVID-19 scenario going on, many small businesses have closed their shops, but they still face fixed expenses to meet with very little or no sales. They might have some cash on hand to pay one to two months of expenses, but no more than that. In comparison to that, a medium-sized business might not have enough cash to cater for the one-month expense.  

This is the high time when small and medium-sized business owners need finances to rebuild their business. The best way to get finances for SMEs is MCA funding also known as Merchant Cash Advance. It is an arrangement in which a financial institution would provide SMEs with a lump sum amount in exchange to a certain pre-agreed percentage of Future Sales. It is the perfect kind of financing where you do not have to go to the bank for different kinds of loans. In recent times, MCA funding is becoming popular due to its great advantages for the SME Market.  

Merchant cash advance makes it possible for the business owners to have access to capital and finances to invest in their businesses. The best feature of MCA is that it does not have strict requirements compared to banks. When you apply for loans from banks, a bank would go through your financial reports to evaluate your cash flows, profit margin and the ability to pay on time with interest. Small businesses have less profit margin and cash flows that easily make them ineligible for loans. MCA has more flexible arrangements that can serve the SMEs facing severe problem due to COVID-19.

With the availability of MCA for small and medium businesses, owners do not need to worry about the current expenses. MCA funding is designed to accommodate SMEs and they can get funding easily within a two to three days’ period. Moreover, it is easy to pay. Your lender can allow you to pay daily or weekly as per agreement.

In a nutshell, Merchant Cash Advance is great for small and medium-sized businesses that need cash to rebuild their business due to COVID-19 shock and to pay expenses when they have little cash on hand. It has easy requirements compared to bank loans and it offers many benefits. The best benefit is that it is easily received as well as easy to repay in the future. The demand for MCA from SMEs is increasing due to COVID-19 drastic situation.