What is the Difference Between an MCA and a Factor?
Owner of Construction Finance, John Sawyer, discusses the difference between a Merchant Cash Advance companies and Factoring Companies. In our earlier video we were talking about a Construction Finance client that was in a cash bind who needed a quick $100,000 to take on a big project that was above and beyond his financial scope. Watch the video below to learn the difference between an MCA and a Factor.
I hope you can relate to me. You are getting these phone calls saying, “You are pre approved for $100,000 in working capital. We don’t check credit, all we do it look at your bank statements. Call now, don’t you want to grow?” You may even be receiving them by robo phone calls. There are hundreds of these companies trying to push money onto small businesses to get a good rate of return. It sounds great, “sign up now and we’ll add $10,000, $50,000 or $100,000 to your bank account tomorrow. Then we will begin to ACH payments out of your account.” There may be situations where that is your only option. But at Construction Finance, we offer a different option for the construction industry and other service related industries.
Let me work you through the math. A person is needing extra capital for payroll, materials, labor, insurance premiums or whatever the need may be. Here is a tale of two fundings, they are totally different.
A merchant cash advance company may call you and tell you that you are pre qualified for a $10,000 advance added to your account today. Including a $30 wire fee, $150 documentation fee and possibly many more fees. But for the sake of the math, let’s say they put in a total $10,000 into your account. This is the story of one of our clients. He had taken the $10,000 unfortunately. The next day he begins having $100 ACH debited from his account daily for 130 days. So, you can do the math, he did get a quick fix today but in the end he paid $13,000 back BUT he paid an extra $3,000 in FEES! There may be cases in your business life where this is the only option but we want everyone to know that we offer an alternative method of funding. We can buy your receivables. A factor is just someone who buys an invoice for a small discount. Our discounts can be as low as 1.5%, 3% and possibly 4.5%.
So if Construction Finance had advanced $10,000 on a particular invoice, our rates would be approximately:
1.5% if that invoice paid in 15 days= $150
3.0% if that invoice paid in 30 days = $300
4.5% if that invoice paid in 45 day = $450
6.0% if that invoice paid in 60 days = $600
So, your eyes aren’t deceiving you. There really is a “0” difference. MCA = $3000 VS Construction Finance Factoring = $300
We are literally 1/10th the price of a quick cash merchant cash advance. If you have a MCA offer and are unsure about the details, call us and we will go over the contract and look for any hidden details that you may be missing.
Construction Finance 870-277-0658