Merchant cash advance for small business

A merchant cash advance is not a loan. With an MCA, a business owner sells a portion of their future credit and debit card sales for money they can use right away.

The provider of the advance (in this case, Credibly) then collects a percentage of the daily sales the business makes from credit cards until the amount of the advance, plus the factor rate,has been collected.

The percentage that is collected from the credit/debit card transactions is known as “holdback.”

Yes, merchant cash advances are legal.

Merchant cash advances are not traditional loans—they are purchases of future payment receivables for an upfront, discounted purchase price.

Because they are true sales and do not come from a traditional bank, there is no fixed payment or term, as well as no principal, interest, or interest rate involved. State usury and/or lending laws do not apply.

A merchant cash advance will not directly hurt your credit score or give you bad credit, but it could indirectly lower your score by raising your outstanding balance and your credit utilization ratio. Enquiring about a business cash advance, however, will not affect your credit score in any way.

Cash advances are priced as a total cost of capital with fees and factor rates included. Factor rates are typically based on the risk associated with funding your business.

Unlike many business loans, obtaining a merchant cash advance for your business does not require you to provide any additional assets as collateral. This can be beneficial for smaller businesses that might not have major assets, like real estate or vehicles, to offer.

With Credibly, merchants can get an early remittance discount. This means a discount is available to business owners who remit their full obligation earlier than the specified terms stated in the initial agreement.

Funds from merchant cash advances can be used for many different purposes, but since it is a type of short-term funding, an MCA is best used for covering temporary cash flow shortfalls.

Small business owners use cash advances for things like buying inventory, paying employees, making emergency repairs, marketing expenses, purchasing equipment, and other short-term expansion projects.

Although merchant cash advances are often attainable for businesses with credit scores that prevent them from getting traditional business loans, that doesn't mean your credit score isn't a factor at all.

Each merchant cash advance provider has different criteria for approval, but they generally do check your credit score before approving an application.

Credibly's credit score requirement, for example, is 500+.

Applying for a merchant cash advance is a much simpler process than applying for a traditional business loan or working capital.

You'll be asked to provide some basic information and documentation, such as:

• Past bank and credit card statements
• A copy of your business lease
• Your business tax ID number
• Your personal social security number
• References
• A copy of your driver's license or another type of government-issued photo ID
• A copy of your business tax returns

Applications for merchant cash advances are approved very quickly, and once approved, business owners receive their funds within a matter of days.

To learn how much you qualify for, fill out our online pre-qualification request. Submission is free and easy and will not negatively impact your credit score.