MCA Loan Eligibility Criteria for Businesses: Does Your Business Qualify for a Loan?


When you search MCA loan requirements on Google, there’s a high chance that you’ll be drowned in a sea of information trying to make sense of the data. The eligibility criteria for Small Business Loans vary geographically and from one lender to another. There are, however, certain threshold requirements that every essential business must qualify first before they can apply for loans or merchant cash advance capital.
 

This guide will assist by helping you steer past the confusion and chaotic array of information and gather a solid insight into the general eligibility criteria and become qualified Merchant Cash Advance loan leads for private lenders. 

Qualification Criteria for MCA Loans

A Merchant Cash Advance can be the perfect solution for any Essential Business owner looking for a quick funding option to finance and eventually get the business running; stricter banking regulations create inefficiency in business operations.

MCA services are provided by multiple lenders who follow individualized loan eligibility criteria that oftentimes vary. Below you may find certain factors that determine your MCA eligibility.

Business Finances

MCA lenders like to assess your business finances to primarily determine if your business is eligible for a quick loan.

Owner’s Investment 

Owner’s Investment is generally the injection of an owner’s assets into their business – usually in 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 as it helps increase the credibility of the business. Here’s how.

If the business capital is mostly acquired from owner’s equity financing rather than debt financing, it usually infers that the business does not owe big amounts to third-party members. This helps Merchant Cash Advance lenders feel reassured about the business’s standings and ability to repay the loans – as it is not already overburdened by pre-existing loans. 

Bank Statements

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. 

financial reports for banks

You may access these documents from your bank’s online portal or have them mailed to your postal address.

Balance Sheet

Balance Sheets are a summary of your assets and liabilities, one which clearly indicates everything that 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.   

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 it is very important that you keep your balance sheets updated.

Income Statements

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 time 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 of the past two years -in order to gain a better understanding of the Highs & Lows of the business over a given period. So make sure you have these papers prepared before you’re planning to apply for a loan.

Trading History

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.

Fund Allocation

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.

different sectors' list for fund allocation

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 payrolls bills and want quick loans to cover them temporarily it’s best that you avail ‘payroll loans’; similarly, if your cash flow is being affected because of late-paying customers, you ought to find yourself an ‘invoice funding’ scheme. 

Conclusion 

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! 

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