Frequently Asked Business Loan Questions
Frequently Asked Questions and Answers for a Merchant Cash Advance
1What is a Merchant Cash Advance?
A Merchant Cash Advance is a type of financing where a business receives a lump sum payment upfront in exchange for a percentage of future credit card sales or daily bank deposits until the advance is repaid.
2How is a Merchant Cash Advance different from a traditional loan?
Unlike traditional loans, a Merchant Cash Advance is not a loan, but a cash advance based on your business’s future sales. Repayments are made through a percentage of your daily credit card transactions, making it more flexible.
3What are the eligibility requirements for a Merchant Cash Advance?
Eligibility for a Merchant Cash Advance typically depends on your monthly credit card sales or bank deposits, the time you've been in business, and your business's financial health. Credit score requirements are generally less stringent than traditional loans.
4How quickly can I receive funds from a Merchant Cash Advance?
Funds from a Merchant Cash Advance can be disbursed as quickly as 24 to 48 hours after approval, making it a fast-financing option for businesses in need of immediate capital.
5How much can I borrow with a Merchant Cash Advance?
The amount you can borrow with a Merchant Cash Advance typically ranges from 50% to 250% of your monthly credit card sales or deposits, depending on your business's revenue and qualifications.
6How are repayments structured with a Merchant Cash Advance?
Repayments are automatically deducted as a percentage of your daily credit card sales or bank deposits. The repayment period and amount are flexible and depend on your sales volume.
7What are the costs associated with a Merchant Cash Advance?
Costs for a Merchant Cash Advance are usually expressed as a factor rate, not an interest rate. This factor rate can range from 1.1 to 1.5, meaning you'll repay 1.1 to 1.5 times the amount advanced. There are no fixed interest rates or APRs. This can vary once you build the relationship with the cash advance company.
8Can I qualify for a merchant cash advance with bad credit?
Yes, businesses with bad credit can still qualify for a Merchant Cash Advance, as approval is based more on the health of your business and your sales volume rather than your personal or business credit score.
9What happens if my business experiences a slow sales period?
If your business experiences a slow sales period, your Merchant Cash Advance repayment could be eligible for readjustment since it’s based on a percentage of daily sales. This makes repayment more manageable during slower times.
10Can I renew or get an additional Merchant Cash Advance if I need more capital?
Yes, once you’ve repaid a significant portion of your existing Merchant Cash Advances, you may qualify for a renewal or an additional advance if your business needs more capital.