Griest Pm Article

The good, the bad, and the ugly: Knowing if merchant cash advance (MCA) is right for your practice

March 21, 2013
A merchant cash advance (MCA) may be the answer for a dental office needing quick cash.

The dental industry is growing and evolving at a rapid pace, and patients are demanding more of a personalized and comfortable spa atmosphere in the dental offices they choose. Everything is changing for dentists, from the look, materials, and tools they use, to the way they operate and market their businesses.

According to the National Health Expenditures report released in 2012, dental spending by consumers is projected to increase at an average annual rate of 5% through 2021. In addition, a Dental Economics survey released in November 2012 indicates that patient volumes are finally reaching their prerecession numbers. In order to capture this market share, stay ahead of customer demand, and remain competitive in their neighborhoods, dental offices must invest in certain upgrades, inventory, new equipment, digital technology, or marketing campaigns.

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This is easier said than done because a practice might not have the necessary cash flow for upgrades and must look at outside funding options. Many dentists first try to secure traditional bank loans, but approximately seven out of 10 loan applications are rejected. Seeking a traditional bank loan is even more challenging for dental offices because an average loan, for example $40,000, is often considered a microloan, and too costly for a bank to underwrite.

One of the best alternative finance options for dental offices is in the form of an unsecured loan or merchant cash advance (MCA). This type of financing offers businesses a lump sum payment in exchange for a share of future credit card sales. An MCA is a quick and flexible financing option that can provide solid businesses with necessary capital in a matter of days, not months like traditional lenders. Also, while banks require approximately five years in business, most MCAs will provide financing to businesses in operation for just one year.

American Finance Solutions, one of the fastest growing merchant cash advance companies for small businesses, counts hundreds of dental offices nationwide as clients. Most of these dentists use the capital advance for equipment (i.e., more chairs or facility upgrades), product inventory, new hires, and marketing.

Here are some tips on what to look for and watch out for when choosing an MCA:

An ethical, holistic approach Banks reject the majority of small business loan applications because they rely on the credit quality of the owner and the value of collateral to support the credit decision. Banks can overlook good businesses because they don't look at the overall health of the business based on its sales. A major benefit of working with an MCA involves a focus on the general health and future prospects of the business, not the owner’s personal FICO score. Also, an ethical MCA should be willing to tell a business what is truly the right amount they can afford.
Quick turnaround time A quality MCA can fund your dental office in fewer than seven days. This is important for times when you need to buy more inventory or supplies quickly, fix a piece of equipment, or need to make renovations in order to stay open for business.
Flexible, realistic repayment schedule There are two main components to repayment of the financing with an MCA. First is the rate that the business is being charged for the financing. The average fee for a cash advance is under 25% of the funded amount. This means that if a business is advanced $20,000, they will likely pay back a total of approximately $25,000. It varies per business and depends largely on how much the business needs and the length of the term. The second is the percentage amount of each credit card transaction that is used to repay the financing. Since many dental offices need cash during August for the back-to-school rush, the benefit of an MCA repayment method is that owners don’t have to repay a high, fixed amount per month during their slow season. Instead, they pay by having a small percentage from each credit card transaction deducted, so payment is tied to the practice’s cash flow. Dentists have to make sure the percentage is affordable and will not place them in financial hardship.

Do your research and you will find the right financing partner to help your business not only survive but also grow and capture market share. When you work with a savvy MCA that allows you to get quick funding and repay it in a timeframe that works best for your practice, your business is able to address its needs and thrive.

Scott Griest is founder and chief executive officer of American Financial Solutions (AFS), one of the nation’s fastest growing merchant cash advances for small businesses. For more information, visit