If you own a small business and need access to immediate working capital, you may have considered a cash advance through your merchant account. Before you take the next step in applying for an MCA, it is important to understand the fees, interest rates, and costs as well as the dos and don’ts associated with a merchant cash advance.
Merchant Cash Advance Do’s
Track Expenses – It’s crucial that you know where your company stands financially. Track your company’s expenses before you decide to get a merchant cash advance or any other business funding source.
Understand the Agreement – Be sure that you fully understand the terms of your agreement so that there are no unexpected surprises down the road. It is important to know what percentage of your credit card sales the lender is taking either daily, weekly, or monthly.
Get Through the Slow Times – If your business is seasonal a merchant cash advance can really help you during those off-season times when business is slow. You can benefit from a merchant cash advance to access working capital to make necessary repairs, pay down debt, or purchase much-needed inventory.
Merchant Cash Advance Don’ts
Don’t Lie About Your Ownership Percentage – This might seem obvious but underwriters report this as a growing trend. Business owners with poor credit scores fear they will be declined and instead state that a partner, friend, or family member with excellent credit is the owner of their business. It is important to remember that:
Credit scores are not a determining factor for a Merchant Cash Advance.
Misrepresentation of ownership will be revealed during the review process and the application will be denied.
Falsifying information to obtain financing is a federal crime.
Don’t Lie on Your Application – If you state that your business generates $100,000 in sales per month, be prepared to show documentation that proves it. Any fraudulent claims or intentional misrepresentation will result in the denial of your application.
Don’t Alter Any Documents – Removing withdrawals from bank statements, changing or editing documents, or any other alterations can result in the denial of an application. Falsifying documents to secure funding is a form of fraud which is a federal crime.
Don’t Use It for Unrelated Expenses – If you decide to go with a merchant cash advance over a small business loan, don’t use your merchant cash advance lump sum to cover personal expenses or other expenses that are not directly related to your business.
A merchant cash advance is a quick and relatively straightforward way to obtain working capital for your business. Before you commit to any type of financing, it is critical that you find a reputable lender. Always do your research and consult a professional to discuss your options with you. ACR Funding has years of experience in providing alternative funding solutions for businesses of all types. Feel free to contact our experts to help find the business funding option that is best for you.