The Easiest Way to Qualify for a Merchant Cash Advance
If your small business needs cash on hand now, look for easy ways to obtain the necessary business capital. Most businesses collect money via credit card transactions. One loan option for business owners is merchant cash advance or MCA which uses those future transactions as a way to obtain funds now. There are many ways that this type of loan is easier to obtain than a traditional bank loan, but it does have its own requirements.
For starters, the lender wants to make sure your business is not working with another lender for a merchant cash advance. If you have one in place already, a lender is not going to approve your business for another. Another type of cash advance such as a line of credit or traditional loan may have to be reviewed if you already have an MCA.
The MCA lender requires the business to provide them with financial data when applying. Items such as credit card receipts collected on a monthly basis and past sales are typical financial pieces the lender wants to see. The merchant cash advance lender is more interested in seeing the actual cash flow of the business. They are less interested in the credit score of the business. MCA can be a great option for those businesses with lower credit scores but has the necessary monthly cash flow required for this type of loan.
If the business owns their property, the owner needs to make sure the building doesn’t have a property lien on it prior to applying. This is a red flag for the lender. Most MCA lenders tend to be a little more forgiving than a traditional bank, but they still have their own red flags they look for before approving applicants.
The financial history of the business is the primary factor for MCA approval. Most lenders want the business to consistently show credit card transactions of a minimum of $2500 to $5000 on a monthly basis. Each lender has their own lower limit threshold they base approval on. On the plus side, many lenders only want the business to have been successfully operating for a year unlike a traditional bank’s expected three to four years.
A merchant cash advance may be a pricey but effective way for small business owners to obtain capital when they need it most. Read the fine print and ensure you understand the contract before signing.