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Three Steps to a Merchant Cash Advance

Merchant cash advances have streamlined the business funding process, offering merchants a quick and hassle-free way to raise money. Unlike traditional business loans, MCA agreements dont require extensive financial paperwork. Merchants can expect a simple and straightforward process when applying for a cash advance.

A Guide to Securing Cash Advance Business Funding

Merchant cash advance providers work fast. With a commercial bank loan, the funds can take several months to arrive. Merchant cash advances are available within a week or two--in some cases, as little as 72 hours. This is an important advantage for business owners facing an urgent need for cash in order to seize an opportunity or pay off a debt.

Heres how the application process works:

  1. Lining up an approved credit card processor. Merchant cash advance funding is essentially an advance purchase of a business future credit card receipts. MCA providers have contracts to work with a variety of processors. In order to secure an advance, the applicant must have an account with one of these credit card processors. Often, the business processor already has a contract with the funding provider; if not, the merchant will have to set up an account with an approved processor.
  2. Submitting an application. Compared to traditional commercial loans, cash advance applications require very little paperwork. Typically, merchants will submit some basic information about the business and credit card statements. A merchant cash advance provider will evaluate the applicant based on average monthly business income and length of time in business. For example, one leading MCA provider requires at least $5000 of monthly Visa/MasterCard receipts and nine months in business.
  3. Evaluating the Contract. Successful applicants will receive a contract specifying the amount of the cash advance and the percentage of monthly credit card receipts the MCA provider will receive in return. Once approved, merchants can sign and submit the contract, and wait for the cash advance to arrive.

Anatomy of a Merchant Cash Advance Contract

Its important to evaluate the contract carefully before signing on the dotted line. Since a merchant cash advance is not a loan, the terms of the contract can be confusing to merchants accustomed to the language of credit and debt. In the case of an advance, the merchant is a seller, not a borrower--she is agreeing to sell a percentage of credit card receipts at a discount tomorrow in exchange for cash today.

The contract specifies:

  • The amount of future credit card receipts the merchant will sell to the cash advance provider
  • The amount of cash advance the merchant will receive up front
  • The percentage of daily credit card sales that will go to the merchant cash advance provider
  • Terms to address contingencies, such as penalties if some part of the agreement is not upheld

Business owners can use this information to assess how much the cash advance will ultimately cost the business.

Business Funding, On Time

Merchant cash advances have made the process of securing business funding faster and easier than ever before. In todays fast-paced economy, instant access to funding adds up to a distinct competitive advantage. Timing is everything--with a cash advance, businesses have the flexibility to jump on opportunities as they arise.

Sources

Merchant Cash Advance Info

The Green Sheet



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