Currently, many financial arrangements are accessible to merchants, and they include traditional bank financing, crowdsourcing, and lines of credit. Even though all these seem to be great asset financing alternatives, a business capital advance loan offers fast financial aid with no collateral.
Even though your probability of securing a Merchant Cash Advance loan today is higher than that of getting a small business loan, you can still get rejected. Note that a merchant cash advance is not meant for every business. Read through the following guidelines to make sure that your business qualifies for a merchant cash advance loan.
Your company must be in operation for not less than one year
Your business is supposed to meet a minimum threshold in regards to average monthly card sales. A newly established company that has a small client base could be a hard hassle to comply with these sales targets. Also, the majority of merchant cash lenders need at least one year’s worth of credit transactions statements for them to approve your Merchant Cash Advance loan today application.
Your business must support credit card payments
Essentially, a Merchant Cash Advance loan is the amount that you obtain up front on your future debit and credit card sales. Card processing is required to determine if your business qualifies for a loan and it is also used when repaying the advance. Paying back the loan is easy since it is automated by deducting a small portion of processed credit card sales on every sales transaction.
Your company is overleveraged or on the brink of bankruptcy
Merchant cash advance credentials might consider as many factors like that of a bank loan qualification. However, the prospective earning capability and repayment potential are mandatory. If the loan provider realizes there is a high risk concerning your loan repayment, then it is possible that your business might qualify for a merchant cash advance loan.
Ponder your industry
Note that not all industries are a fit for a merchant cash advance loan due to how they generate their income. If you generate your revenues on high volume instead of high margins, then this form of a loan product might not be suitable for your business. Even though things might seem to be ok if your sales volume is high, a merchant cash advance can sink your cash flow once your volume slips. This will leave your business short on finances required to cater for critical expenses.
You need to understand how a merchant advance works
In most cases, a Merchant Cash Advance loan today acts as a replacement of traditional funding, but it is never meant for every situation. If you don’t have an idea of how a merchant cash advance works or in which business circumstances it could be applicable, then you are subjecting your company to danger. While a merchant cash provider must take the time to know your business and its requirements, they have all the information concerning your situation. It is your sole responsibility to ensure that you understand the loan product and the impact it can bring to your cash flow.