It’s normal for business owners to borrow money so they can grow their business and cover expenses during lean times. Though traditional business loans are the most common type of financing option business owners gravitate toward, it’s not the only choice you have. A merchant cash advance (MCA) offers a unique way to borrow money without having to deal with lengthy application processes or overly large loan payments. If you’re considering using this financing option, you need to understand how it works. Here’s what you need to know.

MCAs Aren’t Loans

The first thing you need to understand is that an MCA is not a loan, at least not in the traditional sense. Instead, it’s an advance on money that your business will eventually bring in through future transactions. Instead of borrowing a set sum of money from a bank or lender, you’re borrowing a portion of the sales you expect to make in the future. You pay the advance back by giving the lender a set percentage of your future credit card transactions. Those payments aren’t fixed, so you won’t have to worry about coming up with a large sum of money when times are lean.

Lenders Don’t Care About Your Credit Score

One of the biggest challenges small business owners face is dealing with credit score requirements when applying for loans. Lenders want to partner with businesses with proven profit histories and high credit scores. If you’re new to business or your personal credit score isn’t great, getting the loan can be impossible. With an MCA, lenders don’t care about your credit score. They care about the number of credit card transactions your business has each month. If most of your payments come from credit cards, getting the advance shouldn’t be hard.

The Application Process Is Fast

When you apply for a traditional loan, you can expect the application process to take at least a few weeks. In some cases, it can even take a few months. With an MCA, the application process is fast. You’ll get an answer in a matter of days. However, you are paying for that convenience. The costs associated with advances are typically much higher than those associated with traditional loans. This means you’re going to want to shop around to find the best lender to work with. Read up on their fees and make sure you agree to the terms of the advance before you accept the money.

If you’re looking for money to finance your business or just to cover unexpected costs, a merchant cash advance is a great choice. Just remember to do your due diligence and make sure you’re comfortable with the terms from the beginning.