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How to Apply for a Merchant Cash Advance in 4 Simple Steps
February 14, 2018
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How to Apply for a Merchant Cash Advance in 4 Simple Steps

February 14, 2018
If your business is considering an alternative to a business loan, you may want to consider applying for a merchant cash advance. Merchant cash advances are a viable financing option that—contrary to many traditional alternatives—are relatively easy to apply for.

With a merchant cash advance, your business can receive an upfront bundle of cash that can be used for whatever your business’s needs are. Typically, the amount of money you qualify for will be based off your business’ historical sales volume. Once you receive the funds, the cash advance will be automatically remitted in the form of a percentage of your business’s credit card sales. Therefore, the product works in accordance with your business’s sales volume at that time.

If managed responsibly, merchant cash advances can be a useful source of financing. In this post, we’ll explain how you can apply for this product, so that you can get the financing that your business requires!

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. In addition, you should find out the factor rate, which will determine the portion of your credit card sales that will be used to remit the cash advance.

Doing your 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 will be a waste of your time to apply now.

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 will be made automatically through your credit card processor, it is necessary to ensure that your credit card processor is approved by the funder.

If you’re hoping to keep your current credit card processor, you may want to ask them if they have a working relationship with merchant funding providers. However, many businesses prefer to instead find a merchant cash advance company first and then switch their credit card processor if needed.

Step Three: Submit an Application

One of the best things about merchant cash advances is that the application is usually much easier than a traditional bank loan’s process. If you have accurate and well-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, and projected future performances. They will also want to know information about the specific company structure (LLC, corporation, etc.) and your general financial history.

Step Four: Review the Prospective Contract

Even if your business has existed for a short amount of time or has only generated a few thousand dollars in revenue, 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. If after reading the contract, you still believe a merchant cash advance is right for your business, then you will be ready to sign the contract!

Conclusion

Applying for a merchant cash advance is a relatively simple process. Merchant cash advances are a legitimate alternative to traditional bank loans and are particularly useful for businesses that receive consistent credit card payments. If you’re willing to surrender a portion of your company’s future credit card receipts in exchange for receiving cash in the present, applying for an advance may be in your best interest.

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