Working Capital Cash flow is the lifeblood of a small business, and managing it can be a challenge, no matter how healthy the business. When vendors are taking their time to pay you, and unexpected expenses crop up, having working capital on hand is critical. Sometimes the need for working capital is expected. Businesses that do not have reliable and constant daily inventory turnover, such as seasonal businesses and heavy equipment businesses, know that cashflow will often be short and can plan ahead. But more often business owners of all industries run into unexpected situations where cash on hand is a lifesaver. Anchor Banc clients use these funds for buying inventory, taking advantage of opportunities, handling emergencies, repairing equipment, managing payroll, and much more. You never know when unexpected opportunities or costs will occur. It’s always wise to have funds available to protect your business against circumstance.
An agreement is made between the small business and the MCA provider regarding the advance amount, payback amount, and holdback percentage. Once an agreement is made, the advance is transferred to the business’ bank account in exchange for a future percentage of receivables. Each day, an agreed upon percentage of the daily revenues or credit card receipts are withheld to pay back the MCA. This is called a “holdback” and will continue until the advance is paid in full. Access to a business owner’s merchant account eliminates the collateral required for a traditional small business loan.
Because repayment is based upon a percentage of the daily balance in the merchant account, the more transactions a business does, the faster they’re able to repay the advance. And, should transactions be lower on any given day, the draw from the merchant account will also be less. This means during times of slow business, the business’ payback is relative to their incoming merchant account deposits. Learn more..