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How to Start & Grow a MCA Business?

Technology | by Steve Conway
How to Start & Grow a MCA Business?

When it comes to business, financial base is everything you need to care about. So, when there’s a shortage of it it stings the most. For the growing businesses and startups, thus Merchant cash advance arrives as the savior. That’s when a MCA business can come in to save the day. They provide the much-needed financing to help businesses steer through the rough patches.

MCA businesses help entrepreneurs achieve their dreams by providing them the much needed financial support at the time of need. However, before you start an MCA business, here’s what you need to know about it. 

What is Merchant Cash Advance

Merchant cash advance is a short term loan that is offered at a high interest but with very less or zero collaterals. It helps businesses with the much needed financial support and receive repayments through their future sales.

If you are planning to help startups realize their dreams, it’s great to start off with an MCA firm

This step-by-step guide will show you exactly how to set up your own merchant cash advance firm, from looking into the industry to registering your business and considering the most useful digital tools and services.

The MCA business is one of the most lucrative businesses in recent times. But, a successful MCA business needs sound financial status and time. However, if you are willing to work hard, it can be very rewarding.

Merchant cash advances have the advantage of easy repayment, as the lender automatically receives payments from the borrower’s credit card sales until the debt is completely repaid. For the owner of the cash advance business, it’s a hands-off setup that leaves more time for branding and marketing. 

If you are looking to start a merchant cash advance firm, this article will help guide you through the process. We will start with the steps that should be taken before starting your own business.

1. Select an industry where you want to work

Even if you have enough financial resources and you want to finance the budding entrepreneurs, you cannot provide help to anyone and everyone that is coming your way. It’s always recommended to have your niche selected well in advance. Especially, if you are new to the merchant cash advance business, it is important that you select an industry that you know well and is growing. To be successful in this industry, it’s important to have an in-depth understanding of it. The more experienced you are with this type of business model, the better off your company will be.

It might sound overwhelming or confusing at the very first stage, you can think about it in the following way. The following tips might come to your help.

  • Look for an industry where there is demand for products or services but not enough supply—for example, if people want something like cell phones but don’t have enough money available right now because they are saving up for something else (like maybe buying houses). This happens all over America every day! So, when you find a business that sells cell phones , you can consider these for providing merchant cash advance, because it gives you better returns. 
  • Look at trends in consumer behavior—what people buy based on price/value ratio instead of brand name recognition alone; what they commonly purchase together, and more. 

2. Be aware of the industry trends as well as the challenges

When you are starting as a MCA business, you need to be aware of the industry trends as well as the challenges that you might face down the line. Here’s a look at the leading trends of this business.

  • Many start-up businesses opt for the alternative lending sources like MCA for fast cash instead of waiting for traditional funding approval
  • The interest rates on these loans are high and so are the profits.
  • Demand for alternative lending is high when businesses are in crisis. For scenarios like Covid-19 pandemic, when businesses were suffering from money crunch, many startups opt for the MCA loans. That’s the time when there was a large spike in interest for MCA loans.

MCA funding also need to deal with challenges which includes the following

  • The standard rate is 10%.
  • Extremely High startup cost
  • Some SMBs who have already received cash advance often choose to switch to another credit card company before full repayment of the advance amount.

3. Decide on a business model that works for you, but be prepared to adjust it as needed to meet changing client needs and market conditions

As you are developing your business, you need to remember that flexibility is the key to success. Since the market itself is extremely volatile and the client demands can change every time, it affects your business. If you want to grow your MCA business, you also have to adapt as the market changes: for example, if there are less people using credit cards for small purchases, then this could mean that fewer merchants need services like yours in order to get paid by accepting them.

It’s also helpful if you have backup plans in place so that even if something unexpected happens with one client (or even several), another source of income is available—and this is especially true if they’re willing–to pay more than what they owe now!

4. Craft a strong business plan that spells out your goals and outlines a timetable for achieving them

Having a business model ready means you have the probability of reaching your goals faster, avoid pitfalls, and stay on track with what matters most to you as an MCA entrepreneur.

A good business plan has two main components:

  • Goals—What are the specific things you want to accomplish as an entrepreneur?
  • Strategies—How will you do this? What resources do you have available to help achieve those goals? How long will it take before each step toward achieving those goals is complete? What kind of results should be expected at each stage along the way (e.g., revenue targets)?

5. Team up with right people who can help you reach your goals faster, 

The key to success is having the right people by your side, who have industry experience. While this may sound obvious, most of the successful MCA firms who have earned reputation have a wide variety of employees working together as a team. This includes financial experts, lawyers and accountants who can help keep your firm in compliance with rules governing merchant cash advance firms and their clients.

Follow these steps for quick success!

  • Keep in mind always that you are answerable to the audience..
  • Keep in touch with your audience with effective communication
  • Promote your MCA business—and this way you will be able to make more money if you can make your audience excited about what you do as you are! After all, the more the people know, the more the chances of your business increase.
  • It’s important that when speaking with yourself (or anyone else),promote the brand thoroughly and you are all set. After all, being surrounded by a team of people who are doing amazing things every day and making your business run should not be forgotten.

Investment for merchant cash advance business

Instead of investing in a new brand name and various other things, it’s a great idea to buy a franchise from an existing cash advance firm. Such franchise fees generally cost around $100,000, but could be as low as $25,000. As a franchisee you’ll receive training and marketing materials and be well on your way. 

To start your own merchant cash advance business, you’ll likely need initial funding of $200,000, if not more. Most of your startup funds must be ready for borrowing.

Define a Profit Margin 

Do your competitor research before you set your profit margin. A great way to see this is to use your competitors’ prices as a starting point for yourself. Once your business starts running, you can slowly determine your mark-up and final price points. Remember, the prices you use at launch are subject to market changes. 

Define Your Business Structure

Before you start your MCA business, you need to define the structure of your MCA business, because that will shape your taxes, business registration, personal liability, requirements, and more. 

Here are the types of business structure:

  • Sole Proprietorship – This is the most common business structure for SMBs and there’s no other legal distinction between company and the owner. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. The owner pays taxes on business income on his or her personal tax return.
  • Limited Liability Company (LLC) – This is the combination of corporations with the characteristics of sole proprietorships. Again, the owners are not personally liable for debts.
  • C Corp – This is a distinct legal entity and unlike sole proprietorship, the owners are not personally liable for its debts. Instead the source of profits for the owners is the shareholder dividends. In this form, both corporations and owners pay taxes which is sometimes referred to as double taxation.
  • S Corp – Though it is a tax classification and not just the business classification, these are more like LLC in terms of the functions.In an S-Corp, income is passed through directly to shareholders, who pay taxes on their share of business income on their personal tax returns.

However, as an MCA startup, it is better to go forward with the LLC structure because it offers liability protection and pass-through taxation while being easier to manage than a corporation. 

Invest in MCA Software on a priority basis 

MCA Software helps make the process of alternative lending easy and effortless. It comes with following features

  • Automation
  • Client Data Collection
  • Analytics
  • Marketing

For an MCA startup, this CRM helps in managing and streamlining the key jobs. MCA CRM is designed to help Cash Advance businesses run their front-end operations and at the same time improve their customer lifecycle management for retention of clients by providing unsurpassable services.

With an MCA CRM software, the lending process is accelerated. Since everything is happening in the real-time with data available at every touchpoint, minimal approval time is for disbursement of the fund

The Final Takeaway

Starting off an MCA business can be lucrative for obvious reasons, but make sure you have a steady source of finances so that you can provide loans to the borrowers. You can also get government grants. Also, do not forget to apply for business insurance and 

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