June 18, 2024
Merchant Cash Advance

Many merchants aren’t familiar with a merchant cash advance as an alternative means of business financing.  Many small businesses can qualify for sizable amounts of money, and some can qualify for over $500,000.   Merchants who have poor credit and who are in industries like restaurants, salons, and retail businesses traditionally have a difficult time obtaining a bank loan.  However, they can qualify for a merchant cash advance.  Here are 10 easy tips to help small business owners know if they qualify for a merchant cash advance.

  1. Own a business – You must own a business in order to qualify for a merchant cash advance.  Most lenders require that you have been in business for at least 6 months.  Startups do not qualify!
  2. Accept Visa/MasterCard as a form of payment. – A lender will advance a business owner an amount of money against his future credit card receivables.  The lender will collect the money back by taking a percentage of the future credit card sales.  In order to qualify for a cash advance the merchant must process Visa/Mastercard and usually process at least $5,000 a month.
  3. Discharged bankruptcies – Most lenders want to see that the merchant has no open bankruptcies, and if he has been in a bankruptcy, that he has been out of it for at least one year.
  4. Current with Rent – Perhaps the most important reference a lender will check is the landlord/mortgage.  Some companies will pay for merchants who are behind 1 month in rent.
  5. Above 500 personal credit – While a business cash advance is an unsecured loan, and personal credit does not play a large role, if your credit is sub-500 then you probably will not qualify for a traditional loan.  You may qualify for a starter program.
  6. Accept methods of payback. – There are only three ways a lender can collect the percentage of Visa/MasterCard sales.  a) split funding b) ACH c) Lockbox.  There are no other ways, and you may not qualify for one or two of them.
  7. Tax Lien Payments – Lenders want to see that you are on some sort of payment plan for tax liens.  If you have a lien you can still qualify, but you need to be current with payments.
  8. Franchise and Royalty Fees – Merchants must be current with their franchise and royalty fees.
  9. Paperwork – Be able to provide the lender with 3 months most recent bank statements and at least the last 4 months merchant processing statements.  This may very with every lender and on seasonal businesses
  10. Be Friendly! – Character believe it or not plays a large role whether or not you obtain a cash advance.  All lenders will conduct a merchant interview and it certainly helps to be friendly and cooperative.  If you are rude, they probably won’t fund you.