Requirements To Be Approved for Merchant Cash Advance
Many small businesses struggle to receive traditional bank loans and lines of credit. One of the solutions that they can turn to is a cash advance. In this setup, the borrower sells a portion of future credit card sales to the lender. This provides money now with an easy way to repay in the future. Read on to learn some of the requirements for receiving a merchant cash advance.
1) You Need To Accept Credit Card Payments
It is likely no surprise that you need to accept credit cards to receive an MCA. Different lenders accept different cards. Visa, MasterCard, Discover and American Express are the most common.
2) You Need At Least $2,500 in Monthly Sales
If you aren’t consistently bringing in credit card sales, you won’t be eligible for a cash advance. Every MCA lender is a little different, but you will be hard-pressed to find one that will work with less than $2,500 a month. Remember that you will be selling a portion of future sales.
3) You Can Only Have One MCA
Typically, lenders will not give you an MCA if you already have one with them or any other lender. While you may be able to carry multiple types of debt at once, this does not apply to cash advances. You’ll need to wait until your current advance is paid off to receive another one.
4) You Likely Can’t Have Liens of Business Property
Many lenders for MCAs are fairly risk-tolerant, they likely won’t extend an advance if you have any current liens on any business-owned property. However, they may identify you as needing an advance if you do. As with the above, this is mostly to avoid lending to anyone who is too leveraged.
5) You’ll Need To Prove Your Sales
Expect to provide bank statements or other financial evidence of your prior sales. MCA lenders look primarily at your sales rather than your credit score. This can be great for many borrowers, but it is important to prove that you have received the sales you claim. Be ready to validate your application with financial statements.
Is a Merchant Cash Advance Right for You?
MCAs can be a great way for small businesses to get the funding they need. However, it is important to understand what is involved in them. If you think it is the right option for your business, explore some of the options available to you today.
