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November 29, 2021

4 Steps to Take When Applying for a Merchant Cash Advance

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Fora Financial

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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 credit card 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 business financing. In this post, we’ll explain how you can apply for a cash advance. That way, once you receive this funding, you'll have access to the additional cash flow that your business requires!

How to Complete a Merchant Cash Advance Application:

Step One: Research Cash Advance Providers

Prior to submitting a merchant funding application, you should compare different merchant cash advance 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, there won't be any reason to apply. If you know your application will be declined, you'll be better off researching other funding options instead. New call-to-action

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 business cash advance provider first. Once they select their provider, they can switch their credit card processor if needed.

Step Three: Submit Your Cash Advance 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 transactions
  • 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, most providers consider other financial factors when evaluating applications. Most notably, they'll want to see that you receive business credit card payments. If you don't accept frequent credit card payments, you won't be able to remit the advance. Instead, you should consider a different funding option.

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. As we mentioned, if you accept frequent credit card payments, the provider will probably be willing to work with your business. Once you receive your qualifying status, the provider will send you a finalized financing contract. 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 there is any unclear information, don't be afraid to ask your merchant cash advance provider to clarify. They would rather have you ask additional questions than sign a contract that you're confused about. One you review and sign 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 understand the application process, daily or weekly remittance schedule, and other components prior to applying. Merchant cash advances are a legitimate alternative to term 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 December 2021.