How to Get a Merchant Loan or Business Cash Advance

Merchant cash advance can be a lifesaver for a small business. The application process is quick, approval rates are much higher than they are with small business loans, and you get the cash in a matter of a few business days.

Merchant Cash Advance Requirements

What are the important numbers? First is your record of credit and debit card sales. The lender will look at how much you have coming in each week and each month via cards – because that’s how you will pay the lender back. Each day, a percentage of your debit and credit card sales will go to the lender to make part of the payment. Next is the percentage that those sales make of your total sales. In a restaurant, it’s likely that the vast majority of your sales come through debit and credit cards, because people find it a lot easier to plunk down a card and then scribble in a tip than put down cash and wait for the change to come back, and then do the math on that tip – and not as many people are carrying cash these days. The lenders also look at how long you’ve been in business. If you’ve been open just a few months, you’re a lot bigger risk than if you’ve been open a year, and it’s even better if you’ve been open a few years. Obviously, the Olive Garden isn’t going to take out merchant cash advances, though, so you don’t have to have 30 locations and a 10-year history as a business to qualify.

Once the lender has these numbers, then you can get an estimate of how much you can borrow – and how much it will cost you over time. Your application will be assigned a factor rate, generally between 1.2 and 1.4. That tells you how much you’ll have to pay back. If you are approved for a $50,000 merchant cash advance with a factor rate of 1.2, you’ll have to pay back $50,000 X 1.2 ($60,000) in total, and they try to set the repayment schedule anywhere between six months and a year. So you can get that $50,000 business cash advance fast, but then your credit and debit card sales will have that percentage (10% is a typical amount) withheld each business day until you’ve paid back $60,000.

This is great news if you’re cash poor and don’t have much in the way of collateral. If you have a slow day, you won’t pay as much back. If you have a flush day, you’ll have more to pay back with anyway, and you end up bringing your balance down a little bit more.

Merchant cash advances are another way for us to help small businesses grow. Let us help you determine whether the advance is the best choice for you – and the best way to structure it.

Merchant Cash Advance: What Can You Qualify For?

The merchant cash advance is still an extremely new financial solution, particularly in Canada. Business owners have become accustomed to the fact that, if they need a loan, they need to head to the bank. That’s no longer the case, but there are still a lot of questions that people have about this instrument.

The first question we get from our clients about merchant advances is the amount of money that they can get. Once they get a number, they start to think of things they could do to expand and enhance their business if they had greater liquidity. Even though a merchant advance requires significantly less paperwork (and shorter approval time) than a traditional loan, it makes sense that a business owner would like to know how much money an advance would provide before starting the process.

This number is not going to be the same from one business to the next. Merchant advance amounts are based on three numbers: your business’ percentage of sales that are cash, average monthly sales volume through debit or credit cards, and net income margin (what you have in the bank after you’ve paid your bills, calculated as a percentage of your sales). The good news is that our representatives have the tools they need to provide you with your likely merchant advance amount as soon as you provide those three numbers.

Why do we want to know how much money you make from cash sales and what your net income margin is? We do not want the payments you make back to us to repay the advance to leave you unable to meet the day-to-day needs of your business. There are some companies who simply set the repayments as a set percentage of your credit and debit card sales each month, but the problem with that is that Company A might bring in $10,000 a month in card sales as part of $15,000 total sales. Company B might bring in $10,000 a month in card sales, just like Company A, but their monthly total sales might be $20,000 total, so they are bringing in half from cash. Company B can afford somewhat higher repayments so they could gain approval for a larger merchant advance than what Company A might be able to receive. Company B does not have to take the full amount approved, but they would have more flexibility on the basis of their larger cash sales.

This is why you have to pay attention to the numbers. There are some merchant advance providers who will lock you into situations where you end up with negative cash flow. While you might end up with a larger advance up front, you will also end up with payments that could force you into an uncomfortable financial situation, making things worse than they were before. We want our clients to be able to put this money to use – and to flourish after they have paid back the loan. We get the majority of our business from word of mouth, and we work with our business clients to put together the best combination of cash up front and payment plan so that the cash advance ends up turning into a win-win.

Once you receive the advance, you make payments as an agreed percentage of your credit and debit card payments each business day. We don’t set a set payment amount but instead use a percentage so that you don’t end up in the red on slow days. On your flush days, you’ll end up paying back more than you do on the slow days.

Qualify for a Merchant Cash Advance (MCA)

We have a handy quote form that you can fill out to determine what you might qualify for as a total advance amount. You can also give one of our merchant advance experts a call at 1-877-756-1119. We can help businesses in Canada get through a tough financial patch with relief, in the form of quick cash, without some of the crippling repayment terms that some of our competitors offer. After you fill out the application, expect us to contact you within 24 – 48 hours.

The 7 Things to Have Ready When Applying for a Capital Cash Advance or a Business Loan (9 if over $75,000)​

When you ask for a working capital, our network will want to know some details about your operation. You’ll find that you have to provide a lot less information than you would to a traditional bank. Let’s take a look at some of the items you need to make the process move as quickly and stress-free as possible.

Capital Advance or Business Loan Checklist

  1. Copy of government-issued identification for all of the business’ principal owners
  2. Articles of incorporation for the business
  3. Business license
  4. One-year merchant history (when applicable) – your merchant processor should be able to provide this within 24 hours most of the time
  5. One-year bank statement history for all of your business accounts, and one-year statement history for any lines of business credits. Each statement has to include the balance at the start and end of each month, and the total credits and debits for the month. Some lenders only need a 3-6 month history, but if your business is seasonal, then you may need to provide as long as a two-year history
  6. Voided check with your company’s name on it, matching the accounts on the statements that you provide
  7. Copy of your business property lease (if you rent), or your most recent mortgage statement and a copy of the deed or land title (if you own)

If you applying for more than $75,000? Then you’ll also need to provide the following information:

  1. Copy of your latest tax return

  2. Copy of your business’ last two years of financial statements (balance sheet, profit/loss), as well as a balance sheet and income statement for the year to date.

Once you provide this information, you can expect a response within 24-48 business hours. In some cases, funds can be received within a few business days.

If you’ve had problems dealing with banks when trying to get a small business loan, give our alternative network a try. We have connections with alternative funding solvers who want to help small business owners who want either help your business get to the next step. While they want to know the basics about your business, they are simply interested in two things: profiting from their investment and helping other entrepreneurs pursue their goals and dreams. Give us a call to see how we can help you find the best solution for your business.

At Amansad Financial we stand ready to help secure your merchant cash advances and we look forward to working for you!