Small businesses that need working capital fast often look for the best available choice in cash advance financing. When you have a business built around electronic payments, especially a public-facing business that depends on consumer demand, the best solution is often a merchant cash advance. It closes quickly, has flexible payments that move with your income, and provides a lump sum you can use as needed for anything from inventory load-ups to last minute repairs that prevent a closing. If you have never applied for merchant cash advances before, the requirements are relatively simple.
Income Verification
The most important factor in the size of an MCA is the income you derive from your merchant account in an average month. Lenders tend to look at the last 90 to 180 days to figure out that average, so you need to submit proof of income with any application package. It also helps if you have significant income from cash sources along with merchant account income. This is because the easier it is for you to meet cash flow obligations without your merchant account, the lower the risk you represent to a lender and the better the terms they tend to offer.
Credit Checks & MCA Approval
Merchant cash advances do not revolve around your credit score like many term loans from traditional lenders. The approval process does involve a credit check, often one that covers both your business and personal scores, but it is rarely the reason an applicant is denied an advance. It is used to determine risk levels, but the value of the merchant account itself is what drives the approval for most borrowers.
Additional Information & Approval Times
Lenders often collect just the most basic information on applications to cover their income verification and pre-approval processes, then request additional information after approval is basically granted. Failure to provide that information can derail the deal, and it is usually additional tax or business license documentation. Sometimes, it includes more details about your outgoing cash flow obligations to help calibrate the cash advance offer. Even with additional requests for information, most merchant cash advances approve in just a couple days.
Repaying the MCA
Like many short-term financing options, MCAs tend to have high annual interest rates but short enough repayment windows that the actual cost of financing is relatively easy to control. Apply when you need to ramp up or redecorate to get ready for a seasonal surge in demand, then let the increased income pay down the MCA while you reap returns on your investment in success. With a little practice, you can even use MCAs to manage your cash flow cycle annually.