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How to Apply for a Merchant Cash Advance in 4 Simple Steps
July 14, 2021
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How to Apply for a Merchant Cash Advance in 4 Simple Steps

If you’re a small business owner that needs additional financing, you may want to apply for a merchant cash advance.

Merchant cash advances (MCA) are a viable business financing option that, contrary to traditional alternatives, are relatively easy to apply for.

To start, we should explain how merchant cash advances work. With a merchant cash advance, your business receives lump sum financing that can be used for whatever your needs are.

Typically, the amount of money you qualify for will be based off your business’ historical sales volume. To repay the advance, the provider will take a percentage of your future credit card sales until you fulfill your obligations. Therefore, the product works in accordance with your business’s sales volume at that time. This is unlike small business loans or lines of credit, which come with set repayment terms.

If managed responsibly, merchant cash advances can be a useful source of financing. In this post, we’ll explain how you can apply for a cash advance. That way, once you receive this funding, you can get the increased cash flow that your business requires!

How to Complete the Merchant Cash Advance Application Process:

Step One: Research Cash Advance Providers

Prior to submitting a merchant funding application, you should compare different companies.

When comparing different companies, there are a few things you should consider. First, you should determine the cost of the advance and the factor rate.

By knowing this information, you can determine the portion of your credit card sales that will be used for remittance.

Conducting research is important because the differences between funders can make a major impact. In addition, if you don’t meet a provider’s minimum requirements, it’ll be a waste of your time to apply.

Step Two: Work with an Approved Credit Card Processor

To secure a merchant cash advance, prospective providers will need to know that you’re able to fulfill your obligations. Because the payments are made automatically through your credit card processor, you should ensure that your credit card processor is approved.

To keep your current credit card processor, you should ask them if they have a working relationship with merchant funding providers. However, many business owners prefer to select a cash advance provider first and then switch their credit card processor if needed.

Step Three: Submit an Application

One of the best things about cash advances is that the application is easier than a traditional bank loan’s application. If you have accurate and organized financial records, applying for a merchant cash advance is fairly straightforward.

A merchant funding provider will need to review your business’ current financial situation, including:

  • Your total income
  • Typical credit card revenues
  • Projected future performances.

They’ll also want to know information about your company structure (LLC, corporation, etc.) and general financial history. In some cases, the cash advance provider may review your credit score. Although a bad credit score may hurt your ability to qualify, typically cash advance providers will be more concerned with your business’s credit card sales.
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Step Four: Review the Prospective Contract

Even if you’re a new business owner, you may still be able to qualify for a merchant cash advance. However, as is the case with all financial contracts, once you receive the contract, it is important to review the details.

Your merchant cash advance contract will detail the amount you’re expected to remit. It will also specify any penalties associated with defaulting on the lender’s requirements. One you review the contract, you can finalize the process and receive your lump sum financing!

Conclusion: Preparing Your MCA Application Will Help Increase Your Chances of Qualifying

Applying for a merchant cash advance is a relatively simple process. However, it’s crucial that you fully understand the application process, daily or weekly remittance schedule, and other components prior to applying.

Merchant cash advances are a legitimate alternative to small business loans from traditional banks. They’re particularly useful for businesses that receive consistent credit card payments. If you’re willing to surrender a portion of your future credit card receipts, applying for an advance may be beneficial.

Editor’s Note: This post was updated for accuracy and comprehensiveness in July 2021.

Fora Financial

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author's alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.

Andrew Paniello
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Andrew is an experienced writer with a degree in Finance from the University of Colorado. His primary interests are investing, entrepreneurship, and economics.