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Merchant Cash Advance Description

How does a business cash advance work?

Summary

A merchant cash advance (or a low-credit merchant cash advance) is typically structure with a payback is structured to last 6 months (up to 12), but payback is structured as a purchase of future credit card sales (or in some cases, checks). The majority of these we see have business owners selling 15-20% of future credit card sales. This merchant cash advance structure typically results in an advance amount being made that ranges from 70-100% of monthly average credit card sales timeframe is just an estimate because credit card sales in the future can be greater or smaller than expected which will give rise to a quicker or slower payback term.

Five kinds of Merchant Cash Advances:

The finnancing source for the merchant cash advance will make an estimate of how the credit card sales of the small business will trend in the coming months, based on information you provide in your application. It will also consider other factors such as average ticket size or seasonality as to whether to provide a merchant cash advance. Then, based on the credit card sales estimate and the risks assigned to these industry type and the size of a typical customer transaction in deciding, among other factors. The business cash advance company will offer to pay cash up front for the purchase of a fraction of the small business' future credit card sales.

The Application Process

If you are interested in applying, initially you will be asked to supply the following:

Cash advance application
Information disclosure letter
Copy of a voided check
Copy of a drivers license for each signature
Proof of ownership (a document or documents that show the business ober Agreement, Tax Return Schedule, etc). owner name or names and percentage of business owned (examples include Articles of Incorporation, LLC Mem
Most recent business bank statements (all pages)
Last 4 months credit card processing statements (or 12 for seasonal businesses) - all pages
Credit card processing application

You must submit all of this information before we can proceed with the approval process

Review and Approval process

At this stage, underwriters will review your merchant cash advance application package, verify the information provided, make estimates of future business trends, evaluate the risk of making a cash advance, and ultimately prepare one or more quotes. This process typically takes 24-48 hours, and depends mainly on the timely return of phone calls and faxes to various parties. It is common that a credit check will be conducted at this stage, but will not always be needed, depending on the type of cash advance being processed.

After review for a merchant cash advance, the business owner(s) will be contacted and informed of the approval status. If approved, the various types of financing amounts and terms will be discussed. If the business owners are interested in proceeding, then final documents will be prepared.

The contract phase

Final merchant cash advance documents will be sent to the business owners for signature. In these documents, it will explain how much money will be advance, how much will be paid back, what percent of the future credit cards sales are being purchased, among other details. Once returned, various back-end steps are set into motion. If documents are not sent back signed within a short period of time, this may result in a need to resubmit more up to date financials for re-review.

The initial set up and payout phase

Typically within one business day, the business owner will be contacted by a credit card processing specialist to reprogram the credit card terminal or point of sale systems. For modern credit card terminals, this is a simple 5 to 10 minute process, where the specialist will step the business owner through the required keystrokes. In the case of a point of sale system, like those used in some restaurants, the owner will be sent written configuration parameters, and the owner will contact its POS reseller to get the reprogramming completed.

At this point, the credit card processor's back-office systems will also be programmed to perform split processing (or split funding). The programming instructions, in layman's terms, can be described as follows: send x% to the merchant's bank account and 1-x% to the merchant cash advance company's bank account until the payback amount is reached.

Once terminal or point of sale programming is complete, the cash advance company is monitoring the credit card processing sytem to observe the batching process. Typically, after two to four successful batches are sent electronically from the merchant credit card terminal to the credit card processor, the cash advance company will authorize payout to the small business.

Once the required successful batches are recorded, the merchant cash advance company will make a wire transfer to the business bank account indicated with information on the voided check that was requested during the application process. Typically at this stage, the cash advance company may deduct fees when applicable to account for underwriting, bank account openings, and such. These fees will be disclosed in the contracts signed during the contract phase.

The payback phase

The merchant cash advance will be paid back automatically through the process set up during the initial set up phase until the payoff amount is met. These paybacks will occur immediately following the batch process that occurs regularly during credit card processing. Once the payoff amount and other requirements have been met, split processing will stop and the merchant will maintain its regular relationship with the new credit card processing company.

Ongoing business relationship

At any time after the payback phase is complete, the business may request to get another merchant cash cash advance or request other services. Additionally, the business may pay the merchant cash advance off at any time, as well.

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Minimum Qualifications for Credit Card Based Merchant Cash Advance

Visa/MC > $3,500/month

Sales > $100K/yr

In business 60 days or more

1 year left on lease at separate location

accepted industry type (retail, restaurant, doctor, etc.)

FICO > 530

Learn More

Merchant Cash Advance is also known as a business cash advance or merchant loan or merchant credit card loan. These programs are based on future sales to size the merchant cash advance. What is unique about a merchant cash advance is the business will not be required to collateralize nor will the owners typically be required to make a personal guarantee to secure the merchant cash advance. Furthermore, the cash is being made available to an industry (retailers, restaurants) that has typically had difficulty obtaining financing. This is because a merchant cash advance is structured as the purchase of future sales - most commonly future credit card sales, but also future check deposits. There are variants of merchant cash advance programs that allow for those with bad credit to acquire financing as well. Our merchant cash advance program can provide financing for companies throughout the United States and in Canada. Here is a brief list of programs available: California merchant cash advance, new York merchant cash advance, Florida Merchant cash advance, Texas merchant cash advance, Illinois merchant cash advance, Arizona merchant cash advance, new Jersey merchant cash advance, Massachusetts merchant cash advance, Nevada merchant cash advance. We also have offices in Northern California, so we offer Bay area merchant cash advance, San Mateo Merchant Cash Advance, San Jose Merchant Cash Advance. Our office in New York will serve new York merchant cash advance, connecticut merchant cash advance.