MCA lenders look at percent of monthly revenue to decide if your business can afford a cash advance, and for how much.
Apply below for programs that offer the highest cash advance percentage of monthly revenue. This means the largest approval amounts because the highest percent of your business revenue is allowed for an mca.
This is about affordability, which is the #1 reason of the Top 9
Reasons why your MCA was declined.
MCA Percent of Monthly Revenue
Call 919-771-4177 for more info.
Programs above offer the maximum approvals for mca’s as a percentage of your monthly business revenues.
- How it Affects Your MCA.
- Why it is Critical.
- How it is Calculated.
- Should You Care?
1. How it affects your MCA:
The percent of monthly revenues that an mca merchant cash advance can be is what drives the amount of the advance offer much more compared to other qualifiers.
It also tells you the maximum amount in advance that a specific lender allows for bank statement loans. Businesses that have an existing mca with a balance will therefore know how much more that lender can offer them.
An existing advance has a daily payment of $100 per day. The cash advance company you apply with allows businesses to have a maximum 30% of their monthly gross business revenue in cash advance payments.
Further, your business has monthly revenues of $25,000. So the total amount the lender allows your business in advance payments is $25,000 X .25 = $7,500 per month in payments. $7,500 per month % 21 days = $357 day.
An approval for 9 months should therefore render a maximum $48,000 offer by that lender.
While telling the mca company about advances with a few payments left seems like a risky thing to do, they will probably not include existing advance in their calculations.
Call 919-771-4177 for more info.
2. How it is calculated.
Example # 1:
Your business has average monthly deposits in the last 3 months of $50,000 per month. The lender you apply with allows the total monthly amount
you pay on MCA advances to be a maximum of 25% of your monthly revenues.
As a result, they calculate the maximum approval as follows:
$50,000 x .25 = $12,500 per month and there are 21 daily payments or
4 weekly payments per month. So using daily payments, $12,500 % 21 = $591 / daily payment at 5 business days per week.
Another critical step in the offer amount will be how long that lender will make an offer for. Longer terms result in higher offers, so a lender that offers a 9 month term can issue an approval of approximately $80,000.
This is because the math calculated to arrive at this approval amount is as follows:
$591 x 21 = $12,411 x 9 = $111,699, so a rate factor of 1.4 means that
$111,600 % 1.4 = $79,785.
3. Should you care?
You should care because it allows you to do 2 important things:
1. Calculate what percent of your monthly business revenue any mca will be before you apply. Also calculate whether you can afford the mca based the percent of monthly sales it totals. You will also better understand what your affordability limits are for this transaction and for all future borrowing.
2. Ask the lender before applying what the maximum is they allow. You may exceed the maximum and therefore do not need to apply. Also, the maximum amount they will approve you for may be too low. This will save you time, credit inquiries, and direct you to the best small business loan options.
FAQ on mca percent of monthly revenue for an advance.
What does percent of monthly revenue for an mca mean?
It means the maximum percent of your monthly business revenue
that can be allowed for a cash advance. Most lenders cap it between
20% and 30% of your monthly business revenue.
How do I know what my maximum approval will be for?
Take the average of your last 3 months total deposits. Multiply it times .25. This is the maximum amount per month many lenders allow you to pay for a cash advance.
What if I already have an advance ?
Calculate the maximum your business can afford per month. Deduct the monthly amount you already pay from that figure. That is the difference you can still afford on a new cash advance with many programs.
Calculating the percent of monthly revenues an mca will be as a percentage of your monthly business cash flow helps you make several important decisions.
You know in advance if you are applying with a lender that can help and approve you for the entire amount needed. You can ask lenders before you apply what their maximum percentage is and go to another lender if it is not high enough.
Another benefit is it helps you get the highest offers and saves maximum time by applying with the right funders.
For these reasons, know the maximum percentage of your business’s gross monthly revenue lenders generally will allow in mca cash advances. Also check back here on how to calculate approval and offer amounts needed to qualify for using the lenders maximum percentages allowed.