Working capital
The product you take when the alternative is losing the inventory.
- Amount
- $10,000 – $750,000
- Term
- 3 – 18 months
- Time to funding
- Same day to 3 business days
- Typical cost
- Factor 1.15 – 1.45, or roughly 35% – 130% APR
- Collateral
- None specific; general lien and personal guarantee
Sec. 01 — What it is
In plain language.
Two structures sit under this heading. A short-term loan has a rate, a term and an amortisation schedule. A merchant cash advance is not a loan at all — it is the purchase of a fixed slice of your future receipts at a discount, repaid by daily or weekly debits until a fixed total is delivered.
The advance is the one that gets people into trouble, because it is quoted as a factor rate rather than an APR. A 1.32 factor on $100,000 means you repay $132,000. Over six months that is roughly 100% APR, not 32%. We will always convert it for you before you sign.
Approval leans on the last six months of bank statements: average daily balance, deposit consistency, and how many days you ended negative. Credit score matters, but far less than it does elsewhere.
Sec. 02 — What it costs
The price, and how repayment actually works.
Typical cost
Factor 1.15 – 1.45, or roughly 35% – 130% APR
- Daily or weekly ACH debits from the operating account, usually fixed rather than a true percentage of sales.
- Three to eighteen months. Most sit between six and twelve.
- Early payoff saves you little on a true factor-rate advance. Ask for the discount schedule in writing before you assume otherwise.
Sec. 03 — Who it fits
Where this product does its best work.
- A compressor or blast chiller failure where product is at risk and the equipment quote cannot wait for a credit committee.
- Bridging the four to eight weeks until an SBA or equipment approval funds, when the cost of waiting is higher than the cost of the bridge.
- Covering payroll and supplier terms through a USDA hold or a temporary suspension of inspection.
- An unrepeatable inventory buy — a distressed lot of product at a price that genuinely will not come back.
- Emergency repair to a facility that would otherwise fail its next inspection.
Sec. 04 — When this is the wrong product
Three situations where you should not take this.
You are covering a loss, not a gap
A gap closes on its own — the receivable pays, the season turns, the equipment comes back online. A loss does not. If the business is losing money every month at current volume and pricing, an advance does not buy time, it buys a larger hole and a daily debit on top of it. This is the single most common way we see good shops fail, and we decline this deal rather than write it.
You already have one or two advances outstanding
Stacking is when a second or third advance is taken while the first is still being repaid, and combined daily debits start exceeding what the business can generate. It is the reason most of the refinance files that reach our SBA desk exist. If you already have an advance and you need more money, the correct next call is a consolidation conversation, not another advance. We will have that conversation with you and we will not write the stack.
The money is buying a fifteen-year asset
Paying for a walk-in cooler out of a nine-month advance means the asset is still depreciating long after you have paid 40% over the purchase price for the privilege. Equipment financing exists precisely for this, prices at a fraction of the cost, and secures against the machine. If a broker offers you an advance for an equipment purchase, that tells you something about the broker.
Sec. 05 — Worked example
A failed blast chiller on a Friday afternoon
A Nebraska further-processor lost the compressor on its blast chiller at 2pm on a Friday with roughly 30,000 pounds of product mid-cycle. The refrigeration contractor could source and install a replacement unit over the weekend for payment on delivery. The company’s bank could look at it Tuesday.
Outcome
The unit went in Saturday and the product was saved. Eighteen thousand dollars is an ugly number and we said so on the phone — but it was the correct decision against a $96,000 loss plus the customer contracts behind it. At month four the processor refinanced the remaining balance into an equipment note at 11.4%, which is what we had told them to plan for when we wrote the advance.
Illustrative example. Figures are not an offer of credit.
- Product at risk
- ~$96,000 wholesale
- Replacement unit, installed, weekend rate
- $61,500
- Advance amount
- $75,000
- Factor rate
- 1.24
- Total repayment
- $93,000
- Cost of the money
- $18,000, roughly 71% APR
- Term
- 8 months, daily debit of $543
- Time to funding
- 6 hours
Sec. 06 — What you will need
Documents for this product.
- Three to six months of business bank statements
- A one-page application
- Driver’s licence and voided business cheque
- For larger amounts: year-to-date profit and loss and a debt schedule
Sec. 07 — Questions
About working capital.
What is a factor rate and why does it not match the APR?
Will daily debits break my cash flow?
Does taking an advance hurt my chances of getting an SBA loan later?
Can I get this with a 580 credit score?
Sec. 08 — Related
Other products worth comparing.
Sec. 09 — Get started
See whether working capital fits.
Massive Meat Capital is a commercial finance brokerage, not a lender or a bank. Funding is provided by third-party lending partners. Rates, terms, and approval are determined by the funding partner and are subject to underwriting. Figures shown are illustrative and are not an offer of credit. Products are available to business entities only.