Merchant cash advances generally carry a higher interest rate than most other funding options. However, this kind of transaction can put money in your hands faster than just about any other available funding source. If the need for immediate funding outweighs the disadvantage of the somewhat higher interest rate for you, then you may be an ideal candidate for a merchant cash advance. Here are some of the requirements for approval.
Unlike small business loans, eligibility for a merchant cash advance does not depend on your financial history or your credit history. Instead, an MCA is based more on what your current and future financial transactions may be, especially credit card sales. As a ballpark figure, if you have monthly transactions of $2,500 or above, you might be considered a good candidate by an alternative lender.
You will generally have to supply somewhere between four and six months of bank statements, and a number of other financial documents to demonstrate eligibility. Some lenders also require tax returns, profit and loss statements, and Accounts Receivable summaries. It’s generally much easier to be approved for a merchant cash advance because approval hinges on the volume of your monthly business, rather than any other elements which might be consulted by a bank or other lending institution.
What It Does Not Require
One of the things that are not required in order to be approved for a merchant cash advance is any kind of personal guarantee in addition to your business commitment. Most of the time, an MCA is strictly structured in your business name, and that means your personal credit is never consulted. This being the case, there is no personal liability involved with the transaction, so you can’t be pursued in the event of some kind of default on the transaction. As long as the amount of the MCA is roughly equivalent to your incoming monthly revenue, or at most 50% above it, there is no need for any kind of personal commitment.
Would a Merchant Cash Advance Help Your Business?
Merchant cash advances aren’t right for every business, but for those companies suited for them, they can be extremely beneficial. Contact us at GP Solutions to find out if your company would be helped, and how to go about applying for one.