Merchant cash advances (MCAs) are some of the most sensible funding methods for businesses. The nature of their application and payment process is very business-friendly compared to loans and other credit facilities. There are many ways in which they can benefit businesses as well. These include:
Merchant Cash Advances Provide Quick Capital
The application, analysis, approval and disbursement of funds from Merchant Cash Advances can be very rapid. It is not uncommon to find the whole process complete within 24 hours. This is unlike other funders such as banks who may take days or even weeks to process applications. This benefit means that small and medium sized businesses can depend on merchant cash advances to take care of business problems that need quick resolution in order to keep the business going. Examples of these include having a store damaged by a natural disaster, in which case the business person can use a merchant cash advance to quickly repair the damage and be back in business in no time.
The Application Process Is Simple And Straightforward
Most people believe that getting business funding requires a lot of paperwork, legal services and lengthy negotiations particularly if the sums involved are large. However, in the case of merchant cash advnaces, application can be done online and only requires minimal paperwork such as scanned bank statements and rental payment histories. The entire process can be completed in minutes. The simple application process also means that there is less risk of making mistakes which could result in the application being delayed or outright rejected so that you have to start the process all over again.
The Funds Can Be Used for Multiple Purposes
Funding from merchant cash advances can be used to improve many aspects of a business so as to make it more profitable. A common one of these is to use the funds for invoice financing when you have many outstanding invoices. If this translates to very little cash in your business, you could run into problems such as inability to pay overheads or to restock the business. Using the MCA for invoice financing makes this an easily solvable problem.
The funds can also be used for projects to expand or improve the business. This includes improving the interior décor to make it more appealing, purchase of new equipment for specific tasks and even employment of specialized staff to offer better services. Basically, you can use the funds to do anything that will enhance the business and make it more profitable.
Once you have applied for funds such as a merchant cash advance, you may find yourself in a position where you need more funding later on. Various factors can contribute to this, including having underestimated the amount of funding that you initially needed. You may also need additional funding in case other cashflow problems arise.
For instance, if you had applied for a merchant cash advance for invoice financing and then ended up losing some of your stock to theft, you would need even more money to cover for the lost stock. This is one of the many scenarios in which one would want extra funding for their businesses without having fully repaid their current funds.
However, it is usually impossible to get additional funding under the same terms as your current funding. Typically, you will need to make a new merchant cash advance application. The same eligibility rules will apply, and the same risk assessment will be done before being approved. In this scenario, your credit card sales and projected sales volume need to be high enough in order to sustain the first merchant cash advance together with the new one. However, if the sales are not adequate, chances are that the second application will be rejected.
The application process will involve filling an online form, as well as submitting extra paperwork including your bank statements. This application is exactly similar as the initial application for the first funding, and the turnaround time is similarly short especially if you make no mistakes when filing the application. Within a short time, you will receive a decision on whether you are eligible for the additional funds, and the maximum amount of funding you can get. This is calculated by taking into account the current risk profile of the business, which is assessed using more than 25 variables. In addition to that, the performance of your current merchant cash advance as far as repayment is concerned will be taken into account. This is tied to the rate of your credit and debit card sales.
There is a chance that the application will be rejected, and you will be informed about the factors that led to this decision. If they are factors that you can change, you can do so and then attempt to apply for additional funding again, with higher chances of approval. If not, you may need to consult in order to find ways of reducing your business’ risk profile to make it eligible for additional funding.
Funding such as merchant cash advances and invoice financing are becoming popular for small and medium sized banks. It’s usually important for potential applicants to understand the workings of such funding, including how they actually get the funds once approved. This helps them know what to expect and how to approach the application process.
Money Transfer Options
Once you have applied for funding and it has been approved, the next step would be to receive the funds and use it for the intended purpose. How you receive the funds solely depends on the choices you made during the application process. We provide you with multiple methods of receiving the money including through PayPal and bank transfers. When applying for the funds, you will need to choose which method of money transfer you prefer, and then provide the details needed to do so.
PayPal is a convenient method of money transfer, as the only detail you need to provide is the email address of the account. Once the money is disbursed, you will get a notification in your email. One benefit of using this method of receiving funds is that it’s much faster than other methods, since the funds will get to your PayPal account as soon as we send it.
To ensure that there are no complications, ensure that the PayPal email address provided is correct. You should also have an idea of how you will get the money from your PayPal account and use it for your business needs. Most people who have been using the platform regularly will not have a problem with this. If you are trying it out for the first time, however, it may be a good idea to first find out all you can about withdrawing the funds from the account before choosing to use it. If it turns out that it may be difficult for you, you would rather choose to have the money sent to your account.
Your Business Bank Account
The other option for receiving funds is through the bank account associated with your business (not your personal account, unless this also acts as your business account). Depending on various factors such as your bank’s policies, it may take up to three days for disbursed funds to reach your bank account. During application, you will need to provide details of your bank account for the transfer process. Always double check the information to make sure that it’s correct, so that delays and other complications are avoided.
These are the two main ways to get funding sent to your business. For other methods, you can consult our staff members to see if an arrangement can be made to suit your request.
One of the major benefits of using Merchant Cash Advances as funding for businesses is the fact that they are usually disbursed quickly. However, this is can be affected by various factors which should be understood especially if you need to get the money as fast as possible.
How Fast Can The Funds Be Disbursed To My Business?
Typically, funds such as merchant cash advances are disbursed within as soon as 24 hours of application, which is why many business people prefer them. However, there are a few factors that could influence the speed at which the funds reach your account. You need to bear them in mind and take care of them if possible so that you can increase your chances of having the loan disbursed as fast as possible.
Make Sure Your Application Is Free of Errors
If you submit a funding application that is free of errors, chances are that you will get the funding within the 24-hour window or even less in a few cases. If your application has errors, delays can arise from you having to take the time to correct them. They can also be rejected outright, so that you have to spend even more time applying again.
Funding such as merchant cash advances require very little in the way of application. The applications are usually done online, and the paperwork required is little. It is easy to scan through your application several times to make sure that it is free of errors before submitting it. It’s also wise to avoid sending falsified documents such as bank statements, since these may be checked for their veracity.
Ensure That Your Business Is Eligible
Check the eligibility criteria for the type of funding you are applying for, and ensure that your business is eligible. If not, there are some cases where you can take action to correct this, and this should be done prior to application. Once you are sure of the eligibility, you can be guaranteed that the turnaround time for the funding will be reduced, and you can use the funds even for emergency purposes. If you are unsure about the eligibility criteria for the funding, you can always consult the help desk employees for further clarification.
Typically, funding such as merchant cash advances are usually disbursed in unbelievably short times after the application is approved. They should be the go-to funding option for small and medium sized businesses should they need quick capital, rather than approaching traditional funders such as banks who will definitely take more time to deposit the funds. Your choice of receiving the funds will also affect how fast you get the money. For instance, choosing to have the money deposited in a checking account may take up to three days, while PayPal payments are usually instant.
Whenever a business owner requires short term capital quickly, he or she can consider a Merchant Cash Advance (MCA) as an excellent alternative to the traditional bank loans which are notorious for their stringent requirements and approval rates.
What Is a Merchant Cash Advance?
First, let us understand that a merchant cash advance is not really a loan. It is a lump sum given as cash advance based on the credit card sales of a business. When a small business applies for a merchant cash advance, the lender will not evaluate credit criteria and risk like the traditional bank. Instead, the lender will look at the credit card sales (either on a daily or weekly basis) to determine whether the small business is able to repay the merchant cash advance in a timely manner.
Basically, getting a merchant cash advance is akin to “selling” a portion of your predicted credit card sales in order to obtain funding immediately. One should also note that the interest rates for merchant cash advances are usually higher than traditional financing, so it is essential to compare lenders before applying for such a cash advance.
How Do Merchant Cash Advances Work?
After a successful application, the lender will make an agreement with the business owner regarding the cash advance amount, repayment amount, holdback, and the terms of the cash advance. Once the agreement is signed, the funds will be transferred to the small business.
Depending on the agreement, a fixed percentage of either the daily or weekly credit card sales is automatically deducted through the merchant account. Known as a “holdback” this process will continue until the cash advance amount is fully paid back.
Generally speaking, the more credit card sales the small business has achieved, the faster the cash advance will be repaid in full. On days where the credit card sales are slow, the holdback from the merchant account will be smaller. This means that the repayment amount and speed are both relative to the incoming credit card cash flow of the business.
Understanding the Repayment Terms
Usually, the lender will charge between 20% to 40% as the factor rate – this is not to be confused with the holdback, which is the percentage of credit card sales deducted for repayment purposes.
As an example:
A small business advances $10,000 and the lender charges a 20% factor rate. That means the small business has to repay $12,000 in total. The agreed holdback is 10% on daily credit card sales. If the small business averages $15,000 every month in credit card sales, that means $1,500 is collected every month for repayment. It will then take 8 months for the small business to repay $12,000 in full.
Steps In Applying For A Merchant Cash Advance
- Step 1: Apply for Merchant Cash Advance online
- Step 2: Provide the necessary documentation which can include historical data on credit card sales, business tax ID, bank statements, and more
- Step 3: Wait for approval (It can take as little as 24 hours)
- Step 4: After approval, it may be necessary to set up a new merchant account for credit card processing
- Step 5: Agreement details will be finalized so repayment terms are clear between the lender and the business owner
- Step 6: Merchant cash advance funds will be deposited in the small business’ bank account, and the repayment phase will begin immediately
Merchant Cash Advances (MCA) are financial products that allow business people to access working capital rapidly. As opposed to bank loans or other credit facilities, MCAs are usually quickly disbursed and require little effort in application.
Does Your Business Need A MCA?
Merchant cash advances can be used for a wide variety of business needs. The typical scenario where one would come in handy is where the business owner may need capital in a short time, and does not want to go through the hassle of approaching a bank which may take too long and require too much paperwork. Application for the MCA is a quick process, as is the risk evaluation done by the funder. Once complete, the money is disbursed to the business owner. The whole process takes a very short time, which means that any business can depend on the MCA to sort out most problems arising from cash shortages.
If you are still not sure about whether you are eligible for an MCA and whether it will benefit you, you can always consult the funder. The highly trained and experienced employees can quickly assess your business model and your needs, and then give you the necessary feedback. The professional nature of these employees means that their information is usually quite accurate.
Will I Have Problems in Repaying the MCA?
If you successfully get the MCA, you will need to start repaying it at some point. How this is done depends on the terms agreed with the funder. One of the best things about merchant cash advances is that they do not require you to pay a fixed sum on a regular basis. Rather, you will agree on a percentage of credit card sales that will be remitted to the funder as payment for the merchant cash advance.
This is great for businesses of all types since it means that how much you pay depends on how well the business is doing. This is less of a burden compared to having to come up with a fixed sum of money each month even if you are making a loss. In essence, this is one of the most comfortable methods of obtaining working capital for any business.
Are the Loan Terms Negotiable?
Lenders such as banks usually have terms and conditions which are punitive, which makes most small and medium sized business owners fear them. With MCAs, however, this should not be a problem. Part of the application process involves analyzing your business and its fundamentals, as well as other factors such as forecasted sales volumes. This information is used to come up with terms for the merchant cash advance.
Therefore, you really don’t need to negotiate the terms of the loan, since they will already be perfectly suited for your business and your current situation. This makes it extremely business-friendly for you to take up a MCA.
Merchant cash advances are ideal for all types of businesses, since application and payment is a breeze. The fact that they are disbursed in a short time is an added advantage. If interested, it would be wise to understand the basics of how to apply for the MCA before actually going through with it.
How Can I Apply for A Merchant Cash Advance?
To apply for a merchant cash advance, the first thing you have to do is come up with a plan on how you intend to spend the money. Most funders will want a clear plan on how the money will be spent, as well as the impact it will have on your business. Obviously frivolous spending of the funds is a risk to funders, and this may result in your application being declined. If you are able to demonstrate that the funds will be used for a purpose that will make the business grow or prevent its downfall, chances are high that your application will get approved.
This is a process that is sometimes easier said than done. The key to getting it right is identifying what is needed to make the business profitable, and then spend money on that. If you can, you could enlist the help of a finance expert to help you figure this out.
Once this is done, you will need to go online and make the application, making sure that your business meets the basic criteria first. This depends on the funder, but common criteria include the fact that your business has to have been in operation for a year or more. Application for the MCA is done online, and only a few documents such as bank statements and rent payment history will be required. These can be scanned and sent via email or mailed normally. After a short period, your application will be reviewed and you will get feedback about whether it’s accepted or rejected, often within 24 hours.
What Does the Application Review Entail?
The funder verifies the documents required, and then goes over them to build a risk profile. More than 25 other variables are considered to build a proper risk profile including historical credit card sales volumes, credit score trends, the location of your business, the local unemployment rates and more. This information is not only used to assess your eligibility, but to also determine the terms of your merchant cash advance if your application is accepted. The majority of applicants are usually accepted.
What If My Application Is Declined?
Applications are declined for a minority of applicants. If this happens to you, you have the right to contact the funder to find out the basis for declining. This could range from factors such as not submitting the correct documentation to having a highly risky profile. If the application was declined due to a mistake such as not submitting the correct documents, you can easily correct it and apply again. If you are careful this time round, your chances of getting the funding will be high.
Merchant cash advances are an ideal source of funds for small and medium sized businesses to cater for all types of needs. In order to successfully apply for an MCA, one would need to first make sure that their firm is eligible. Fortunately, these requirements are usually not as stringent as those for other funders such as banks. This makes merchant cash advances accessible to a very wide range of businesses.
As a business person, you would be happy to know that the terms of eligibility for a merchant cash advance are not very stringent, so practically any business can access one. However, there still are eligibility criteria, and you need to understand them prior to starting the application process.
One of the most common is the amount of time the business has been in operation. Typically, merchant cash advances are not given to businesses that are just starting up, but those that are in operation and have established themselves. This is because of the mode of payment of of merchant cash advances, which depends on future credit card sales. It is impossible to know whether a newly started business will grow. However, if one is established, one can use the historical sales data to forecast future credit and debit card sales. This is then used to determine the terms of the merchant cash advance. As a result, most funders will require the business to have been in operation for at least one year.
The trend in sales volumes can also influence the eligibility for merchant cash advances. The best scenario is where a company has an increasing year-over-year sales volume, showing that the company is growing. However, even if there are some decreases in sales volumes, the business may still be eligible. However, if it is found that the sales volumes are plummeting at a constant rate, this may negatively impact the eligibility of the business. This is particularly important if this decline indicates an imminent collapse of the business.
Unless the merchant cash advance is meant to be used to reverse this trend, chances are that the application will be declined. Fortunately, our employees will work with you in determining the cause of the decline in sales volume, and ultimately come to an understanding regarding the application. Though a continuous decrease in sales volumes every year is a bad sign, it does not mean that you will be completely ineligible for the merchant cash advance, though the negative impact it will have will be significant.
These are the main factors influencing your business’ eligibility for a merchant service loan; other minor criteria can be gotten by discussing the issue with our employees. The ultimate way to determine if your business is eligible for the merchant cash advance is to have our employees go over all the risk evaluations associated with your business (which includes the above) after which you will get a report about your eligibility.