The modern business landscape is characterized by wide opportunities for funding. Alternatives to traditional bank loans appeared, with MCA being one of the most popular options. The rise of new funding solutions allows businesses to develop more stably and attract new opportunities for their growth.
The MCA (Merchant Cash Advance) service allows for getting funding quickly. While businessmen should collect sets of documents and prove their creditworthiness when they address banks, MCA brokers set minimum requirements for issuing advances. This feature makes such solutions especially relevant for small businesses and companies that need prompt fundraising within a short time.
What is an MCA Business?
Before we delve into the issue of how to launch a new business in the MCA sphere, first, let’s discuss what such companies deal with and what kinds of services they provide. An MCA business is a company that provides advances for entrepreneurs and firms upon certain conditions. Advance borrowers should meet minimal terms for get an advance approval.
What is the principle of MCA business functioning? The main difference between loans and advances is that the percentage of repayment is calculated from the net income gained over a certain period (usually a week or a month). In comparison with traditional bank loans, where a fixed percentage is set for the borrowed sum, the size of advance repayment varies monthly, depending on the gained funds. Other crucial advantages of advanced over traditional bank loans include:
- A minimum set of documents. While banks require collecting huge packs of papers, MCA brokers need just one statement to make sure that you’re creditworthy. In most cases, a history of previous transactions is required to judge about a borrower’s creditability and calculate the sum of the advance. Based on the obtained documents, they can predict the expected revenues and repayment sums.
- Flexibility. MCA companies offer individual conditions, customizing advance sizes, repayment schedules, and other terms based on the situation of each client. Thus, MCA brokers offer more flexible conditions, ensuring timely and effective repayment without stringent terms.
- Speed. The process of advance issuance takes less time. Since borrowers do not need to collect tons of papers and attract guarantors, they can apply for an advance quickly. It’s even possible to apply online via a website. As for application processing, MCA brokers need less time and provide a response in 1-2 days, while banks take up to a week to regard your application and process all the provided documents.
These benefits determine the high popularity of MCA brokers in the modern business landscape. More and more businesses turn to such firms for instant loans. Thus, the demand for MCA providers increases.
Steps to Start an MCA Business
So, now, let’s discuss how to start a Merchant Cash Advance business. Follow the below-mentioned guide to develop a fruitful company in this sphere.
Market Research
Before you start any enterprise in any domain, it’s essential to make an investigation of the market niche. When it comes to the MCA industry, brokers can cater to different types of clients, i.e. there are companies engaged in retail, restaurants, hotels, etc. Depending on the serviced sector of the market, demands and terms may differ. To find your place in the sphere, it’s important to conduct market research and define free or low-competitive directions. So, the establishment of your MCA business should start with the identification of target industries.
As part of this step, you should also analyze competitors and demand for MCAs. A comprehensible market research implies the identification of competitors and their analysis. Surf their websites, study their offers, and point out strengths and weaknesses that can be further used for the development of your business strategy.
The main task at this stage is to collect all the needed information about the industry to build a strong foundation for your future company. So, pay due attention to this step.
Develop a Business Plan
Once you’re done with the market analysis, you can proceed to define business goals and financial forecasts. Here, you can use the obtained information to simplify the task. Based on it, it’s possible to outline the main objectives, evaluate your perspectives, and set goals for upcoming months or years.
At this step, business owners should also choose a legal structure (for instance, LLC, corporation, etc.). Study the features of different options and select which one is suitable for your company. Here, you may need a consultation with a professional lawyer who can clarify the subtleties of each type of business.
Secure Funding
Explore existing funding options (personal investment, loans, or investors) and select which type suits your business the most. In this regard, you should investigate the available sources of attracting funds and evaluate which option is more favorable for your venture.
Once resources for funding are defined, make sure to manage cash flow for providing advances. You should have a clear understanding of how much free funds you have, how much money you can borrow, etc. Thus, make sure to develop a precise cash flow management system for constant monitoring of cash movements.
Legal and Regulatory Compliance
Never start a business until you research state and federal regulations. Make sure to learn the related legal basis to act within the law and be transparent. Thus, the study of law regulations is an important step. It’s advisable to cope with this task together with a skilled specialist who will help clarify law intricacies.
Next, draft contracts and ensure legal compliance. Here, you’re like to hire layers, if you do not have specialists in your company, to ensure correct contract drawing up.
Technology and Automation
When you’re done with the legal side of your business setup, it’s time to think about the comfort of employees and workflow arrangement. Nowadays, a lot of digital solutions for workflow automation are offered on the market. The rise of technologies and innovations allows businesses to attract digital assistants that simplify employees’ duties.
CRM comes as a popular example of such innovation. This high-tech specialized software is perfect for underwriting, payment tracking, and CRM. If you need high-quality software for MCA, you can find it here. SugarAnt is an example of a specialized CRM for MCA businesses. It’s developed specifically for this industry, taking into account the peculiarities and demands of such companies. CRM software helps streamline the workflow, improve efficiency, and achieve maximum productivity.
Modern digital technologies also allow for the use of analytics tools for risk assessment. This feature helps eliminate the risk of unsuccessful deals and secure MCA providers. Thus, do not neglect this software and implement modern technologies into workflows.
Marketing and Lead Generation
Online presence is another important component of business development in the modern world. Nowadays, online is a powerful source of promoting services and seeking new clients. Thus, make sure to build an online presence by creating a website, filling it with SEO-optimized content, starting paid ads, etc. Use brokers, referrals, and digital marketing to attract clients.
Risk Management
Finally, pay attention to risk management. You should foresee all the possible outcomes of your cooperation with each particular client. Make sure to evaluate creditworthiness. Develop a procedure for the assessment of the creditability of each client. Set up repayment structures and manage defaults to minimize the risk of failures. Take time to work on the assessment system and train employees to use it properly.
The MCA sphere is a popular sector of the modern economy. It has come as a worthy alternative to traditional bank loans with lowered requirements for issuance. Thus, more and more businesses stick to this solution. This is why more and more MCA brokers are registered nowadays. If you want to start an MCA business, make sure to find your niche on the market and follow the above-mentioned steps. In this case, you’ll be able to develop a long-term prosperous company with minimum risk and maximum revenues.
