A Merchant Cash Advance can be the perfect solution for any Essential Business owner looking for a quick funding option, and eventually getting their business running; strict banking regulations create inefficiency in business operations.
MCA services are provided by lenders who follow individualized loan eligibility criteria that oftentimes vary.
Below you will find certain factors that will determine your MCA eligibility.
MCA lenders like to assess your business finances to determine if your business is eligible for a quick loan.
Owner’s Investment is generally the injection of an owner’s assets into their business – usually in the form of cash or capital (fixed assets).
It’s always a good idea to invest one’s own time and money into their own business, thereby, improving their credibility as a business. Here’s how.
If the business capital is mostly acquired from owner’s equity rather than debt financing, which then infers that the business does not owe big amounts to third-party members.
This helps Merchant Cash Advance brokers feel rest assured about the business’s standings and ability to repay the loans – as it is not already overburdened by pre-existing loans.
MCA lenders would want a glimpse at your bank statements to cross-check the accuracy of your accounting documents.
These documents help them assess your cash flow while giving a brief idea of your cash management.
You may access these documents from your bank’s online portal or have them mailed to your postal address.
Balance Sheets are a summary of your assets and liabilities, which indicate everything you own (assets, money, etc) and what you owe to your business associates and/or suppliers. Balance sheets provide a sneak peek into the financial health of your business.  Â
MCA loan providers assess your overall business condition from a balance sheet to assess whether your Essential Business has enough assets to cover your liabilities alongside the loan that they may sanction you.
So you must keep your balance sheets updated.
Revenue Statements or Income Statements provide lenders with a clear overview of your business’s Profits and Losses.
It’s usually a summary of money coming in and going out of your business.
So speaking, it shows how much revenue you’re earning; how much of it you’re spending and how; and what you’re left with at the end of a respective period.
This helps MCA loan providers get a better insight into the cash flow of your business and as a result, they’re able to estimate whether you’ll be able to successfully repay the loans.
Lenders may request Profit & Loss Statements for the past two years -to gain a better understanding of the Highs & Lows of the business over a given period.
Make sure you have these papers prepared before you’re planning to apply for a loan.
MCA lenders usually demand a history of your business’s operations.
Some lenders require your business to be operational for at least six months; while others may require more (1-2 years in general).
Since most businesses have a high rate of fallout within their first year, most MCA loan providers like to trust businesses that have been operational for a little longer than that.
Once you’re done providing the financial & historical data of your business, MCA loan providers want to know your plans regarding the money you want to borrow.
In some cases, specific MCA lenders/loan schemes have strict requirements that dictate how you should/shouldn’t use the loan money.
Moreover, MCA lenders like to make sure that you invest the money wisely, thus, guaranteeing payback within the designated period.
Other than that, outlining/identifying the reasons for your required funds help you choose the perfect loan schemes as per your needs.
Say, for instance, you’re running short on the payroll bills and want quick loans to cover them temporarily you should avail of ‘payroll loans’; similarly, if your cash flow is being affected because of late-paying customers, you ought to find yourself an ‘invoice funding’ scheme.Â
Merchant cash advances can be a lifeline for startups and small businesses during economic downturns when the normal cycles of expansion and contraction in the market can significantly impact cash flow. Despite diligent cash flow management, overhead reduction, and minimization of excessive costs, small businesses may still require additional capital to stay afloat due to their size and youth.
Seasonality-related fluctuations linked to specific times of the year, such as holidays and events like back-to-school, the Super Bowl, and the Olympics, can particularly affect several industries. The following industries could benefit from MCA and their loan eligibility criteria.
Restaurants face sales fluctuations of up to 20% due to seasonal factors like holidays, gas prices, and tourism. While peak tourism months can boost sales, restaurants still need funding to maintain a steady cash flow. To cope, restaurant owners use strategies like marketing campaigns, reducing staff, and managing inventory; however, these may not suffice, leaving them in need of funding.
A merchant cash advance can provide restaurants with the necessary funds to sustain operations during seasonal fluctuations.
Retail businesses require additional funding to maintain inventory, cover overhead expenses, and support growth opportunities. A merchant cash advance can offer quick access to capital without collateral or a high credit score. When cash flow crunches occur due to unforeseen circumstances or seasonal fluctuations, MCA can provide an injection of cash to keep the business afloat. MCA can also support retailers in investing in new inventory, expanding to new locations, or launching new marketing campaigns to drive sales.
Flexible repayment terms and no fixed payment schedules make MCA a valuable tool for retailers who require fast and convenient financing options.
Businesses in the tourism industry experience seasonal fluctuations in demand, with peak seasons bringing excess cash flow but off-season leading to reduced revenue. A merchant cash advance can provide funding to help these businesses deal with lulls, cover overhead expenses, and invest in growth. MCA offers flexible repayment and no fixed payment schedules, making them ideal for tourism businesses requiring fast and convenient access to capital.
Examples include hotels, travel agencies, and entertainment venues.
Outdoor service businesses, including landscaping, pool maintenance, snow removal, and roofing, depend heavily on weather conditions, with off-seasons leading to reduced demand and revenue. Some businesses may reposition themselves to stay operational, while others require additional funding to survive. Merchant cash advance offers quick access to capital, enabling outdoor service businesses to cover expenses during slower periods, maintain inventory, and invest in growth opportunities.
MCA has a flexible repayment structure and no fixed payment schedules, making them an ideal financing option for businesses in the outdoor services sector.
You can consider it a safe bet if you pay attention to the general criteria we’ve discussed above & act accordingly. Just make sure to prepare in advance for the Merchant Cash Advance loans and there’s a high chance that you’ll make it on your first try!