A merchant cash advance is a helpful short-term financial tool for businesses. This type of financing offers incredible flexibility and relatively easy qualification requirements. In other words, getting MCA financing normally isn’t a problem — knowing how to use it correctly is the challenge. Here are several do’s and don’ts that can help you make wise decisions.

Stick to the Essentials

Just because you qualify for a huge loan doesn’t mean you have to max out the amount when applying for one. With any kind of financing, it’s smart to limit yourself to specific needs only.

For example, if you want to use MCA financing to buy new computers for your office, check prices before you apply for the merchant cash advance. That way, you get financing that is just the right size for your needs.

MCA financing has a comparatively higher interest rate than a small business loan (but a better interest rate than credit cards). By getting only the capital you need, you keep financing costs lower.

Plan Ahead

Getting started with MCA financing is far easier when you go into your appointment knowing how much capital you need. This advice applies to inventory purchases, equipment upgrades, remodeling costs and other reasons to use MCA financing.

Determine ahead of time how much your business can afford to use in payments. That way, you feel in control of the capital.

Ask Questions

There’s nothing wrong with asking the MCA lender questions. A good lender takes the time to explain how the process works and answers your questions clearly. Feel free to inquire about total costs and how repayment will work for your business.

You should also read the contract before you sign it. Of course, if you have a lender you trust, you can be fairly sure there are no hidden terms, but it’s still a good idea to read any financial agreement before signing.

Don’t Shop Around Too Much

Every time you apply for MCA financing, the lender needs to perform a credit inquiry. When this happens once or twice, it’s not a big deal. If you apply at five or six different places, however, your credit score may be affected.

Lenders may wonder what’s happening, possibly thinking that you’re getting turned down at the other places. Ask questions to as many lenders as you want, but only apply or pre-qualify if you’re pretty sure the company is a good fit for your business.