A merchant cash advance (MCA) can provide business owners with fast working capital. Before you apply, however, you should do your homework and make sure that you have everything in order. Here are five tips to keep in mind.
Make Sure It’s the Right Option for You
Thie first thing that you need to do before applying for a merchant cash advance is to make sure it’s the right option for your business. In general, businesses that receive a large portion of their income from credit card transactions (restaurants, retail stores, service businesses) are well-suited for this type of financing.
Know Your Score
An MCA company will likely run your credit to determine your overall financial health. Review your credit score before applying and compare it to the lender’s requirements. If you don’t meet the requirements, look for other lenders. If your credit score is too low, you may also want to consider taking steps to improve it. Doing so can help to improve your chances of approval.
Determine Why You’re Applying
Before applying, figure out the purpose of the advance. Doing so helps you to determine how much to request. Whether you need to hire more employees, purchase additional inventory, or get some new equipment, know why you’re applying in the first place. Your potential lender may also ask the purpose of the funds, so you should know the answer before you fill out the application. The reason can also help the lender determine how much to offer.
Get Your Documents in Order
An MCA is a purchase of future credit card receivables. Lenders want to see your credit card statements to make sure that you’ll be able to pay the advance back. How many statements you need to provide varies by lender, so be sure to check the requirements before filling out the application so that you’ll have all of the necessary documents in order when they’re requested.
After submitting the application, the lender may have additional questions or need other documents. Respond quickly to requests. The faster that you get back to the lender, the faster they can process your application. Timely responses also bring you that much closer to receiving the funds you need for your business.
A merchant cash advance can be an effective tool for giving your business the cash boost it needs. Making sure that it’s the best option for you and getting everything in order before you apply can help make the process go much more smoothly.