Lendio Merchant Cash Advance: Funding Options for Small Businesses
A merchant cash advance provides businesses with upfront capital in exchange for a percentage of future sales. Lendio's merchant cash advance service connects small business owners with funding solutions when traditional financing options aren't accessible. Here's what you need to know before pursuing this alternative.
What Is a Lendio Merchant Cash Advance?
A merchant cash advance (MCA) is not technically a loan but rather a purchase of your future sales. Lendio, a business financing marketplace, connects small business owners with various funding options, including merchant cash advances from multiple providers.
When you receive a merchant cash advance through Lendio, you get a lump sum payment upfront. In return, you agree to repay this amount plus a fee through automatic deductions from your daily or weekly credit card sales or bank account transfers. This arrangement makes MCAs particularly suitable for businesses with consistent credit card transactions or steady revenue streams.
How Lendio Merchant Cash Advances Work
Lendio functions as an intermediary between businesses seeking funding and MCA providers. Their process simplifies access to capital through a streamlined application system:
First, you complete Lendio's application, providing details about your business finances and operations. Their algorithm then matches your profile with appropriate funding partners. If approved, you'll receive offers from multiple MCA providers, allowing you to compare terms. Once you select an offer, funding typically arrives within 24-72 hours—significantly faster than traditional bank loans.
Repayment occurs automatically through either a fixed percentage of your daily credit card sales (known as the holdback rate) or through ACH withdrawals from your business bank account. This structure means payments fluctuate with your revenue—lower on slow days and higher during peak periods.
Provider Comparison: Lendio vs. Other MCA Options
When considering a merchant cash advance, comparing providers helps ensure you find the most suitable arrangement for your business needs:
| Provider | Funding Speed | Application Process | Maximum Amount |
|---|---|---|---|
| Lendio | 24-72 hours | Single application for multiple offers | Up to $500,000 |
| Kabbage | Same day to 3 days | Direct online application | Up to $250,000 |
| Fundbox | Next business day | Accounting software integration | Up to $150,000 |
| PayPal Working Capital | Minutes after approval | For PayPal merchants only | Based on PayPal sales |
What distinguishes Lendio from direct providers is their marketplace approach. Rather than offering MCAs directly, they connect you with multiple funding sources through one application. This creates competition among lenders, potentially resulting in more favorable terms than approaching providers individually.
Benefits and Drawbacks of Lendio's MCA Service
Benefits:
- Quick access to capital, often within 1-3 business days
- Higher approval rates compared to traditional loans
- No collateral requirements
- Flexible repayment based on business performance
- Simple application process with minimal documentation
- Option to compare multiple offers through one platform
Drawbacks:
- Higher cost compared to traditional financing options
- Factor rates typically range from 1.1 to 1.5, translating to effective APRs that can exceed 50%
- Daily or weekly payments may impact cash flow
- Potential for a cycle of advances if not managed properly
- Less regulatory oversight than traditional lending products
While Square Capital and OnDeck offer direct funding with potentially faster approval for existing customers, Lendio's marketplace model provides broader options for businesses without established relationships with these providers.
Pricing and Cost Structure
Merchant cash advances use factor rates rather than interest rates to determine costs. Through Lendio, factor rates typically range from 1.1 to 1.5, meaning that for every dollar borrowed, you'll repay $1.10 to $1.50.
For example, with a $50,000 advance and a factor rate of 1.3, your total repayment would be $65,000. This represents a fee of $15,000, which is substantially higher than traditional loan interest. However, unlike loans with fixed monthly payments regardless of revenue, MCA payments adjust with your sales volume.
Additional costs to consider include:
- Application or origination fees (some providers charge 1-5% of the advance amount)
- Administrative fees for account management
- Early repayment considerations (some MCAs offer no savings for early repayment)
While BlueVine and other competitors might advertise lower factor rates for prime borrowers, the true advantage of using Lendio lies in their ability to shop your application across multiple providers, potentially securing better terms than you might find independently.
Conclusion
Merchant cash advances through Lendio offer a viable funding solution for businesses needing quick capital, especially those unable to qualify for traditional financing. The convenience and speed come at a premium cost, making MCAs better suited for short-term needs with clear revenue potential rather than long-term financing.
Before proceeding with a merchant cash advance from any provider, carefully review the total cost of capital and assess whether your business can sustain the daily or weekly payment structure. Consider consulting with a financial advisor to evaluate if alternative financing options might better serve your specific situation. For businesses with strong sales but limited access to conventional loans, Lendio's marketplace approach provides a valuable opportunity to compare multiple MCA offers through a single application process.
Citations
- https://www.lendio.com
- https://www.kabbage.com
- https://www.fundbox.com
- https://www.paypal.com/workingcapital
- https://www.squareup.com/capital
- https://www.ondeck.com
- https://www.bluevine.com
This content was written by AI and reviewed by a human for quality and compliance.