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    If you’re a small business owner considering applying for a merchant cash advance, you’ll want to ask yourself some questions first. What are the eligibility requirements? How much money can you borrow? And what are the repayment terms? By asking these questions, you’ll be able to determine if a merchant cash advance is a suitable option for you. So, let’s take a closer look at some of the things you need to know before applying for a merchant cash advance. 

    How do I get a merchant cash advance?

    Applying for a merchant cash advance couldn’t be easier! Most MCA providers have a one-page application you can fill out to qualify. Generally, the business should be open for at least six months, be on pace to have at least 75K in annual revenue, and the business owner(s) having a 550+ credit score. 

    How do merchant cash advances work?

    A merchant cash advance involves selling a percentage of future debit and credit card sales for cash today. The MCA lender essentially purchases an amount of your future sales at a discount. The agreed-upon factor rate determines the profit margin the mca lender receives.

    When can I use a merchant cash advance?

    Merchant cash advances are usually the best option for smaller businesses with limited funds. Companies can use these types of loans to purchase inventory, pay off debts or buy new equipment and supplies that will help them grow their business.

    Do merchant cash advances report to credit?

    Some business owners use merchant cash advances to access capital for their companies. However, this option is not recommended because providers do not report your payment history. However, if you default on a merchant cash advance, the lender will sue you and get a judgment against you, which could damage your credit. 

    Do banks offer merchant cash advances?

    Small business owners who need quick funds can use merchant cash advances. Banks do not offer them. They usually only come from an alternative business lender.

    What is the benefit of using business cash advances?

    Using a business cash advance is an easy way to get quick access to the funds you need for your company’s daily operations and other short-term investments. The approval process takes very little time, but be aware that this type of business financing product often has higher fees. 

    Are merchant cash advances a good idea?

    It is a good idea for small businesses that need some help getting their business going during slow periods or capitalize on having more working capital. If you’re sure you can quickly put the money to work and generate a profit with it, a merchant cash advance could be a great benefit to your business. 

    Is a merchant cash advance bad?

    One of the risks associated with merchant cash advances is putting additional strain on a small business’s finances. The fixed holdback rate makes sure you pay back the merchant cash advance but may tighten up cash flow if the company isn’t managed correctly. 

    Are merchant cash advances legal?

    Merchant cash advances are a legal way for small businesses to get the funding they need. Some may wonder if these business financing products are safe considering the higher fees. It’s up to each company to decide how they employ the capital and work with the underwriters to make sure the terms are structured in a way that won’t harm cash flow to the point the business can’t operate normally. 

    Does a merchant cash advance require a personal guarantee?

    Unlike traditional bank loans, merchant cash advances don’t require the use of personal assets as collateral. 

    What is a merchant cash advance agreement?

    A merchant cash advance agreement occurs between a company and lender to provide funds for the company in exchange for a portion of the company’s future debit/credit card sales at a discount.

    What happens if you stop paying a merchant cash advance?

    If you default on a merchant cash advance, it might constitute a breach of contract, and they will likely file a lawsuit against you. In addition, the MCA company will likely include a confession of judgment clause in their agreement which allows them to take legal action against the personal assets of those who have breached these terms. If you borrowed from multiple lenders, the first to get a judgment will have a priority position to levy against your assets or garnish your bank accounts. If you’re having trouble repaying your cash advance, it’s possible to modify the repayment plan if it includes a reconciliation clause.

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    Written by

    United Capital Source

    United Capital Source has been helping small business owners find the working capital they need to grow their businesses since 2011. Your business is our only business!

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