Here’s how it works. Unlike lenders who provide less-than-desired advances based upon a suggestion or hope of future advances, the periodic MCA commits the funder (TransMark) to two additional installments after the initial advance, in roughly 45 day increments, where the merchant has otherwise been compliant with the terms of the first advance. It’s more than just a “we’ll see.” It’s more than just keeping your fingers crossed. It’s a contractual agreement to advance more funds, where contract terms are satisfied.
There are no new processing charges in the future advances. They are not a “renewal,” where all the prior advance and funder profit are paid off, avoiding the difficult accumulation of receivables that must be sacrificed. Importantly, unlike the traditional “add on,” the second and third periodic advance come before the account is paid down to 50% of receivables purchased. You cannot find that anywhere else in the industry.
The limitations of the periodic advance are predictable—total sums being less than monthly credit card receipts and sudden drop offs in credit card sales disqualifying future advances. But like a tradition advance, it can be the competitive edge, or the thumb in the dike, that causes merchant business to flourish.
“A merchant cash advance (MCA) is great for businesses short on cash that need funds quickly and process many sales with credit or debit cards.” Nasdaq.com (Aug. 6, 2016).