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Merchant Cash Advance: Questions Before You Apply

The financial crisis that swept the entire country in 2008 prompted banks and other financial institutions to implement tighter lending controls. This was the impetus behind merchant cash advances gaining increasing popularity among business owners. This type of business financing is an excellent alternative to business loans as it provides businesses that would otherwise have no option with much needed financing.

A merchant cash advance gives businesses the opportunity to sell future credit card and debit card sales for immediate cash. This type of business cash advance offers flexible repayment methods that are very attractive to business owners. Businesses that have strong credit card and debit card sales like restaurants and retail store usually take advantage but it is actually available for almost any type of business.

If you are one of the many business owners that are considering applying for a merchant cash advance there are some questions that you should ask before going into it. The first set of questions is somewhat of a requirement checklist.

  • Are you incorporated? Do you have a bank account and do you accept credit card transactions? Only businesses that accept credit card and debit card transactions are qualified to apply for merchant cash advance, although these companies often offer lending programs for those companies that don’t.
  • How long have you been in business? Have you been accepting credit cash transactions for three to four months? How much are your credit card sales? Do you have three months worth of business bank statements? There are minimum requirements for each lender that your business should first meet in order to qualify.
  • Do you have any foreclosures, bankruptcies, or tax liens in your history? These make it harder to get a merchant cash advance approval.

The next set are questions you must ask your merchant cash advance company in order to get a clearer picture of what to expect.

  • Will there be a need to switch credit card processing companies? Some merchant cash advance providers are partnered with a specific credit card processing company and might require you to change. It’s better to know this in advance to avoid confusion and additional unnecessary costs.
  • What are the repayment terms? What kind of repayment method are we going to use? Split method, lock box, or ACH withholding? What percentage of the credit card sales will be paid to the business cash advance provider?

It is very important to clarify pertinent details of the contract before applying for a merchant cash advance in order to make sure that there are no surprises. These questions must be asked in order to properly prepare for business financing from one of the many merchant cash advance companies.

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