When you get a Merchant Cash Advance (MCA) for your business, it’s important to know how it might affect your business credit. Unlike traditional loans, an MCA can influence your credit in different ways.
Here’s a simple guide to how an MCA can impact your business credit:
1. No Immediate Effect on Your Credit Score
An MCA usually does not directly affect your business credit score. This is because MCAs are based on future sales rather than your credit history. So, taking out an MCA won’t immediately lower your credit score.
2. Your Payment History Matters
Even though an MCA doesn’t directly impact your credit score, how you manage the repayments can have an indirect effect. Paying on time can help maintain a good relationship with lenders and may positively influence your creditworthiness in the future. Conversely, missing payments might harm your reputation with lenders.
3. Managing Cash Flow and Credit Health
The flexible repayment system of an MCA, which is based on a percentage of your daily or weekly sales, can help you manage your cash flow better. Good cash flow management means you are less likely to miss payments, which can indirectly support your credit health by ensuring you can meet other financial obligations.
4. Impact on Future Loans
While an MCA itself might not show up on your credit report, how you handle it can affect your ability to get future loans. Lenders might look at your history with MCAs when deciding whether to approve new credit. Showing that you handle MCAs responsibly can be a positive sign to future lenders.
5. Communication with Your Lender
If you run into financial trouble, it’s a good idea to communicate with your MCA provider. They may offer solutions or adjustments to your payment terms, which can help you avoid negative effects on your credit.
Conclusion:
A Merchant Cash Advance generally doesn’t directly impact your credit score, but how you manage the repayments and your overall cash flow can influence your credit in other ways. By handling your MCA responsibly, you can help ensure your business maintains a strong credit profile and is well-prepared for future financing.
For more information on how Merchant Cash Advances can benefit your business and to find out how Paymentsave can help you secure the right MCA, visit our website or contact us today.