A Merchant Cash Advance is a form of working capital where the bank purchases a portion of your future credit card sales.
What types of businesses are preferred?
Most retail businesses who process several credit card transactions per day are preferred. Restaurants are highly desired for this program due to the number of smaller dollar amount transactions that are processed on a daily basis.
A business who has been in business for at least 12 months under the same ownership and has accepted credit cards for at least 12 months are 2 of the larger requirements when applying for a Merchant Cash Advance.
What Can I Expect To Do When Applying?
The application process is actually quite simple compared to the normal business financing you may be used to. When applying, you will generally submit a credit application and the most recent 4 months (all pages) of your merchant statements (credit card statements). The bank will use this information to check your credit and to see what you are averaging in daily credit card sales.
How Much Can I Expect To Qualify For?
While this number will vary based on your application and merchant statements, a good rule of thumb is to plan on qualifying for about 125% of your average credit card sales over the most recent 4 months.
How Does It Work?
Once you submit your application, merchant statements and are pre-qualified, you will generally receive an offer letter from the bank within about 24 hours.
At that time you will know how much you qualify for, how much you will pay back over the term, an estimated time frame to pay the Merchant Cash Advance back and the daily percentage rate that the bank will keep out of your credit card sales.
You will not know the exact ending date for the program because the bank does not know what your future credit card sales are going to look like. An average ending date ranges from 6 to 14 months.
You pay the bank back when you batch out each day so there are no monthly bills to worry about. The bank also takes into consideration that you need to keep your business open so the percentage that they keep out of your daily credit card sales will be minimal.
What Are Some Automatic Disqualifications For This Program?
* Being in business for less than 12 months
* Not accepting credit cards from your customers for at least 12 months
* Having a recent bankruptcy or foreclosure (within the past year)
* Currently behind on your mortgage payments