How to Qualify for a Merchant Cash Advance

How to Qualify for a Merchant Cash Advance

Getting a merchant cash advance is quick and easy, and filing an application can take very little time. With quick approval turnarounds, you can access cash much quicker than with other means of financing, including short-term loans or long-term loans.

Each payday loans in Georgia merchant cash advance will have a principal amount, a factor rate, a payment period, payment frequency (often daily), and a percentage deduction of your daily credit card sales, including future sales.

Best Uses for Merchant Cash Advances:

Because a qualifying business owner can usually access an MCA quickly it can be a good option for a business owner who needs fast cash to cover some of the following uses cases:

  • Temporary cash flow help
  • Purchasing inventory at deep discount
  • Unplanned expenses
  • Paying other debts due
  • Working capital

If you have the cash flow and credit card receipts to support the typical daily debit from your merchant account, an MCA will allow you to get in and out of the financing quickly and should be considered a short-term financing solution-albeit a sometimes expense one.

Qualifying may be the easiest part of working with a merchant cash advance. Unlike most business financing options, applicants don’t need to have years in business to qualify. The amount and number of your credit card transactions are more important than a business’ credit profile, putting less emphasis on personal and business credit information-solid sales numbers can help a business with poor credit qualify for a merchant cash advance.

Can I Get a Merchant Cash Advance With Bad Credit?

A Merchant Cash Advance provider is typically more interested in the amount of credit card transactions your business processes each day, so they are often willing to work with businesses that have a less-than-perfect credit profile. They will typically require direct debit access to your merchant account and some providers may even require your business to use their hardware to process your credit cards.

Merchant Cash Advance Repayment Structures

Because an MCA is not a loan and is really an advance based upon your credit card volume, the way you repay the advance and the fees you pay might feel unfamiliar with what you are accustomed to. Most MCA providers debit money from your daily credit card transactions to repay the MCA (though some providers allow for weekly debits instead). If your MCA requires daily debits, there is generally no grace period. You should expect to start making daily payments the day following disbursement of funds.

Additionally, there iliar with. In addition to terms like periodic payment, daily debit, and payback period, there is something called a holdback. Holdback refers to the percentage of your daily credit card transactions that are debited from your account every day. The holdback percentage is usually between 10% and 20% of your daily receipts and remains fixed until the advance is paid in full.

Borrowers often confuse the holdback with the rate you will pay for the advance. If you want to understand the cost of an MCA, the factor rate is key to evaluating it. Most MCAs, when they express the cost, will use a factor rate. Think of it as more of a calculation rather than an interest rate percentage.

For example, if you are quoted a factor rate of 1.5, that means that for every dollar you borrow you will pay back $1.50 (or $.50 per dollar). In other words, if you borrow $10,000 at a factor rate of 1.5, you will pay $5,000 back to the MCA provider as your cost of the borrowed capital. $10,000 x 1.5 =$15,000.