Start with the cash-flow problem, not the financing product
Compare the actual dollar discount and expected inventory margin against financing cost and sell-through time.
What to calculate first
- The exact amount required to solve the business objective.
- The date the money is needed.
- The cash inflow expected after the money is deployed.
- The total current daily, weekly and monthly financing burden.
- A slower-than-expected scenario.
How an MCA may be evaluated
Providers commonly review recent business revenue, deposit consistency, bank-account activity, existing obligations, time in business, industry and owner/business verification. The requested amount should be proportionate to the operating profile.
What to compare in any proposal
Compare net proceeds, total purchased amount or payback, payment frequency, expected duration, fees, reconciliation rights, early-payoff treatment and default provisions. A fast answer is not a substitute for understanding the economics.
When to slow down
If new financing would primarily be used to make payments on old financing without correcting the underlying cash-flow problem, additional capital can increase pressure rather than solve it. Model the combined burden before signing.