Merchant cash advances provide several benefits for small business owners. They give you access to virtually immediate financing for buying the products you need to keep your business running strong. An instant infusion of capital can be useful for dealing with emergencies or making urgent payments related to taxes, rent, and payroll. What do you need to do to qualify for a merchant cash advance?
Typical Business Requirements for Merchant Cash Advances
First, it’s important to know that qualifying for a merchant cash advance is usually far easier than obtaining a traditional term loan. So, even if your company doesn’t have the best credit, you can still apply and likely receive approval. That said, the better your business’s financial health, the easier it is to get approved. Also, solid financials can give you access to better loan rates. Here are the main requirements for companies interested in a merchant cash advance:
Significant Monthly Credit Card Transactions
MCAs operate by giving you a loan based on the amount of monthly credit card transactions your business has. If your customer base uses credit cards frequently for purchases, this is a big help in making sure you qualify. Each lender has unique requirements for transaction volume, but expect a requirement of around $2,500 to $5,000 each month.
Solid Financial Data Related to Past Credit Card Transactions
Because MCA loans are based on future credit card sales, lenders need to have a good idea of your periodic transaction volume. This means that they want to see financial records for your business related to your credit card sales. They generally look at your business’s merchant account and request credit card receipts. The cash flow of your merchant account is important.
No Current Relationship With MCA Lenders
If you’re already working with an MCA lender, you usually can’t apply with a second one. First, you need to pay off the original loan and then you can opt to work with a different lender if you want to.
No Liens Against Your Business Property
MCA lenders aren’t comfortable with this kind of debt signal. Any liens are an immediate red flag that lenders just can’t ignore.
MCA lenders don’t care as much about your personal credit history or business credit rating. This makes MCA loans a possible solution for companies with less-than-stellar credit, as long as the credit card transaction volume is there.
Merchant cash advances are designed as short-term loans to help your business survive and grow. They also function effectively as bridge loans to tide you over while waiting for authorization for an attractive term loan. If you need working capital, MCA loans are a great alternative lending option.