Some firms will look at credit scores while others will only care about your current capacity to repay the advance
MCAs are typically for businesses that need access to quick capital to cover unexpected expenses. Business owners can use the advance for any number of things such as purchasing materials for a large order, hiring new employees, preparing for a high-demand season, or buying new equipment.
A merchant cash advance is an option for businesses who are relatively new and don’t yet qualify for a traditional bank loan. It’s also ideal for the small business who doesn’t have enough assets to provide as collateral. And if you are seeking financing that is short-term, MCAs offer that along with flexible repayment terms.
MCAs are for any type of business, regardless of industry and size, who have a consistent flow of credit card transactions. It’s also one of the few options for any business who has less-than-perfect credit. Credit score requirements will vary from lender to lender.
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Because the lender will take a percentage of credit card sales, the business owner only needs to assure the lender that their daily credit card sales are steady enough to guarantee repayment. They can prove this by presenting credit card receipts from the last two or three months of business operations.
Every lender is different. One lender might require that you maintain at least $2,500 in monthly credit card transactions, while another might require $5,000.
While most will require that you’ve been in business for at least a year, another might consider you for advance with less than six months time in business. Some lenders may even require that you make five or more deposits a month. Some may require less.
However, there are lenders out there who are more concerned about your credit score rather than your monthly credit card transactions. Lending firms generally want to see a credit score of at least 500 – 600. However, some lenders are willing to offer advances to businesses who have lower credit scores. Unfortunately, in these cases, the rates and fees for these MCAs are much higher than the typical percentage. Sometimes they are higher by as much as 5% to 10% the regular retrieval rates.
How to Apply for a Merchant Cash Advance
The MCA application process is usually very simple. Depending on the paperwork, a merchant cash advance is decided anywhere between hours to a few days. Once the business owner has is approved for an MCA, they may receive the funds in their accounts in just two short days.
Most lenders allow you to apply for merchant cash advance online. They will have a page dedicated to applications which typically involve a form that will ask you the following:
Once you’ve agreed to the terms and conditions, you can proceed to the next step. This may involve uploading your business documents, such as:
If your business does not have a business credit card, it will not have a business credit score. Instead, the lender will look at whether your business has any existing loans or has ever applied for financing in the past. Expect to be contacted by an officer from the lending firm who will walk you through the next steps of the application.
If approved, credit card processing is set up. In some cases, the lender may require you to switch credit card processors. Once this is all set up, the lending firm deposits the funds in your business’s bank account usually within a few days; expect for repayment via the merchant account to begin immediately.