Are you seeking an alternative to the traditional small business loan? A merchant cash advance (MCA) might be the cash solution you have been looking for. Consider the following helpful tips on merchant loans and how to decide if this financing option is right for your business.
What is a Merchant Cash Advance?
A cash advance involves the lender purchasing a slice of your business’ future credit card sales. In exchange, your business receives a cash advance as a lump sum payment. An increasingly sought-after alternative to traditional funding, a cash advance also provides a flexible payment process. The payments fluctuate along with your sales volume. During slower months, your business pays back less. During busy months, it pays back more. Payments are typically drawn directly from the merchant account your business uses to process debit and credit card sales and take place on a daily or weekly basis.
How It Works
Arguably the quickest form of small business financing, the application itself can be completed in a matter of minutes. Traditional lenders, on the other hand, require extensive documentation to apply. They also involve complicated contracts and have strict credit requirements. Even after providing all the required financials and business history, you could wait weeks or months to hear that you have been denied for funding.
Merchant cash advance approval is based on business performance rather than personal credit, time in business or financials; thus, this financing option has a high approval rate. Depending on the provider, you will be asked for minimal documentation like merchant processing statements and bank statements. This information will help the provider quickly determine if you qualify, and how much you qualify for.
With First American Merchant, you can expect:
- Credit Scores Below 500 are Approved
- Receive Your Funds 72 Hours from Application
- Simple, Flexible Programs
- No Tax Returns or Financials Required
The Benefits of a Cash Advance
A merchant cash advance allows your business to secure cash quickly and easily, with no need for collateral – even if you have a bad credit score. This is just one of the many reasons why merchants are increasingly turning to cash advances
- Fast funding & easy renewals. Once approved, your business can receive its funds in as little as 72 hours – if not sooner. In addition, you are free to renew your advance when 50 percent of the original balance has been paid down.
- Revenue-based collections. Because payment is a percentage of your daily sales, if you have a slow month your business pays back less. If it has a good month, it pays back more.
- Rebuilds credit score. Because a merchant cash advance is not a loan, it will not negatively affect your business’ credit. In fact, if you use the cash advance to pay off debt, you can actually improve your credit score.
How to Choose a Merchant Cash Advance Provider
So how do you know which merchant cash advance provider is right for you? This will largely depend on your business type and industry. Traditional lenders shy away from merchants they deem “too risky” to work with. The amount of funding you need and how quickly you need it will also be determining factors when it comes to choosing a cash advance provider. If your industry experiences high chargeback rates and high-volume sales, a traditional lender will more than likely turn you away. (Bad credit, insufficient business history, bankruptcy or tax liens are also reasons you will be denied.)
If any of these obstacles are things your business has been struggling with in finding funding, consider working with a high-risk provider. As a high-risk specialist, First American Merchant has year of experience in offering merchant loans, payment processing services and chargeback protection to a long list of business types and industries banks refuse to work with. Automotive, beauty salons, bars and nightclubs, construction, doctors, retail, dentistry, trucking and restaurants, to name a few.
To learn more about our merchant loans and other services, contact us today for more information and/or a consultation.