Give us a call for more info 1-800-210-5649
Skip to content

A Guide to Merchant Cash Advance Underwriting

The merchant cash advance (MCA) industry was born back in 1998 as a response to a decline in small business lending from traditional banks. The MCA was introduced through a company called AdvanceMe (now known as CAN Capital).

Interested in a Merchant Cash Advance?

The merchant cash advance can be described as a category of SME financing, which, however, differs from other SME financing options. Regulators don’t consider MCAs loans, so this type of financing isn’t subject to the same legislation that governs other types of small business financing options.

According to a report by one of the investment banks, the volume of MCAs provided to US SMEs has been steadily growing in recent years, and is forecast to reach $15.3 billion in 2017. This is up from $8.6 billion in 2014.

Today, many small business owners choose this highly popular type of business funding over traditional business funding. By the way, those who think an MCA is a short term loan or a high interest advance should know that it’s just a sale.

Consider turning to a reputable business funding provider like First American Merchant for a merchant cash advance. FAM, an award-winning online alternative lender and processor specializing in the high risk sector, will purchase your future sales at a discount. You and FAM will agree to the amount of sales being purchased and for what discounted cost. With

  • Less than 500 credit scores are approved
  • Funds arrive within 72 hours
  • Programs are simple and flexible
  • No tax returns or financials are required
  • Application is fast

Merchant Cash Advance Underwriting

The MCA industry has 4 major paper grades, which are assigned to your business based on your risk profile. The latter is assessed through various factors such as your credit card sales or credit scores. They are used to figure out the amount and terms you can be approved for.

  • A Paper Grade Merchants (best quality): FICO score 650 or higher
  • B Paper Grade Merchants: 600 – 640 FICO
  • C Paper Grade Merchants: personal credit scores below 600
  • D Paper Grade Merchants (worst quality): poor personal credit scores

Paper Grades Are Determined Based on:

  • Industry
  • Home-based business or not
  • Personal credit score and the business’s credit score
  • Number of non-sufficient funds (NSFs), overdrafts, and negative daily or monthly bank balances
  • Presence (and status) of tax liens, judgment liens, and bankruptcy filings
  • Presence (and status) of current MCAs and/or alternative business loans
  • Status of business landlord or business mortgage payments

If your personal credit score is below 650, don’t expect an A paper grade. If you’ve had over 5 NSFs per month over the past 3 months, don’t expect the best rates. If you have an outstanding tax lien, don’t expect an A paper grade. Finally, you won’t get an A paper grade if you have multiple MCA or business loan balances outstanding that are stacked on top of one another.