How Hard is It to Get a Merchant Cash Advance?

When comparing business financing options, one of the most popular is a merchant cash advance (MCA) because of the fast funding and more lenient qualifications.

In this guide, we’ll explore how hard it is to get approved for an MCA, what you can do to increases your odds of approval, and much more.

Benefits of a Merchant Cash Advance

If you’re a business owner, you know that access to capital is essential for growth and success. A merchant cash advance (MCA) is one option that can provide you with the funds you need quickly and easily. Here are some key benefits of a merchant cash advance:

1. Fast access to cash: With an MCA, you can get the funds you need in as little as 48-72 hours. This is much faster than traditional loans, which can take weeks or even months to process.
2. No collateral required: Unlike traditional loans, MCAs don’t require collateral. This means you don’t have to put up any of your assets as security for the financing.
3. Lax credit score requirements: MCAs don’t require high personal or business credit scores, instead putting more weight on card sales numbers. This makes them a great option for businesses with less-than-perfect credit that have strong sales.
4. Flexible remittance agreement: Remittance obligation for MCAs are based on a percentage of your daily or monthly credit card sales. This means that your remittance will fluctuate based on your sales volume, which can be helpful during slow months.
5. Easy application process: Applying for an MCA is simple and straightforward. You’ll typically need to provide basic information about your business, such as your monthly revenue and credit card sales.

While there are many benefits to a merchant cash advance, it’s important to weigh the pros and cons before making your decision. MCAs can be more expensive than traditional loans, with rates that can extend to over 20%. Additionally, it can be difficult to determine when you’ll be able to fulfill the advance in full due to factor rates.

How Easy is It to Get a Merchant Cash Advance

Getting a merchant cash advance (MCA) is relatively easy compared to traditional bank loans or other types of business financing. The process is simple, straightforward, and much quicker than other options – which can make it attractive for some business owners.

Unlike traditional loans, MCAs don’t require collateral or extensive documentation which can expedite the process. You also don’t need to have a perfect credit score to qualify for an MCA. Instead, your funder looks at your business’s cash flow and card sales history to determine your eligibility.

However, getting an MCA isn’t always easy for everyone. Your business needs to have a steady flow of credit card sales to qualify for an MCA. If your business doesn’t have a high volume of card sales or enough business history, you may not be eligible for an MCA.

Each funder is unique when determining the requirements for approval. It’s best to reach out to your funder to get a better understand of what they need to approve your application.

Merchant Cash Advance Requirements

1. Business History of Over One Year with Supporting Tax Returns

To qualify for an MCA, your business should have been operational for at least one year. This requirement helps funders assess the stability and track record of your business. You’ll need to submit tax returns and other financial documents that shed light on your business’s financial health and history.

2. Minimum Annual Revenue of $100,000

Funders usually require that your business generates a minimum of $100,000 in annual revenue. This threshold serves as proof of your business’s financial activity and its capacity to handle and remit the advance. Strong revenue reassures funders about your ability to manage the remittance of the advance, despite potential fluctuations in sales. To increase your odds of approval, a higher revenue number can be beneficial.

3. Three Months or More of Card Processing Statements

To apply for an MCA, you should be able to provide at least three months’ worth of card processing statements. These statements are key to showing the volume of your card transactions which are heavily weighted when determining your eligibility. They give funders insight into the regularity and reliability of your sales, which is critical for assessing your cash flow and determining the advance amount.

4. Credit Score Minimum of 550

Although a high credit score is not the cornerstone of securing an MCA, having a credit score of at least 550 is often necessary. This score demonstrates a basic level of creditworthiness and financial responsibility. While the focus for MCA approval is more on your business’s operational metrics, a baseline credit score helps in further validating your eligibility. If you want to secure a better rate and increase your chances of getting approved, aim for a credit score of at least 650.

It’s important to remember that not all funders are the same, and some may have more strict requirements than others. We recommend that you speak with several funders to get a better idea of what’s important in their application process and get a better chance of approval.

What to Consider Before Applying

When you’re considering a merchant cash advance (MCA), it’s crucial to evaluate your business’s current financial health. Funders typically focus on your cash flow. You’ll want to ensure your business has a steady stream of income which can be verified through your card sales.

You should also consider the time your business has been operational. A minimum of six months to a year in business is generally required to demonstrate sustainability and the capability to handle the cash advance. Some funders may requires two years of business history, so be sure to check with your funder before submitting your application.

Be aware of the cost of an MCA. The principal amount may seem attractive, but factor rates can significantly increase the total cost amount. These rates are often based on your business’s cash flow and general creditworthiness, making it a more accessible option for businesses that may otherwise not qualify for financing.

You’ll also want to consider how quickly you need funds. MCAs can be funded rapidly, often within a few days, which can be beneficial for urgent needs. However, this speed comes with higher costs compared to traditional finance vehicles.

You can also read our guides on merchant cash advances vs lines of credit and how MCAs compare to credit cards for more help finding the right type of financing for your business.

How Long Does it Take to Get Approved for a Merchant Cash Advance?

When you apply for a merchant cash advance, the timeline to approval can be quite rapid. In many cases, funders offer a decision within a few hours to several business days.

The speed of approval relies largely on the efficiency of your funders process and the completeness of your submitted documents. If your application is well-prepared and your business demonstrates consistent cash flow, you could be approved almost immediately.

Keep in mind, the faster the approval and funding process, the sooner you’ll have access to the capital you need. However, it’s crucial to understand the terms, such as factor rates and potential additional fees, to evaluate the overall cost of the advance.

Closing Thoughts

Securing a merchant cash advance is much easier than other types of business financing. Because they focus more on your business’s card sales and revenue, they are more lenient when it comes to your credit score and other metrics.

If you plan to secure a merchant cash advance, be sure to weigh all of the pros and cons and consider the cost of your financing.

If you’re ready to secure financing, get in touch with Specialty Capital today to secure the best factor rates available!