The Other Side of the Coin: How Merchant Cash Advance Firms See You

Knowing What's in it for You--and Them
Many small business owners consider merchant cash advance arrangements as a primary source of funding. The promise of a percentage of credit card sales can provide starting capital for businesses as an option to other types of funding. But knowing the process means understanding the flip side of the coin: how do MCA groups determine the type of businesses they back and what are they looking for with respect to acceptable risks.

Merchant Cash Advance 101
A merchant cash advance is not a loan. Rather it's a purchase of a specified amount of card sales that have yet to occur with no fixed term. The MCA provider is entitled to receive a set percentage of its merchant client’s daily net settlement batch and is based on the merchant’s card sales volume. However, if the total credit card sales don't meet the MCA projections, the MCA providers must assume the loss with no recourse. And that means they must carefully choose the businesses that they align themsleves with through a process of selection.

How Merchant Cash Advance Providers Manage Risk

1. They Examine Your Risk Reward. This means they examine your analytics. Fiding a new provider might entice them tot ake a chance on you even if your borrowing criteria doesn't match rigid standards.
2. They Underwrite Like Crazy. You'll need to provide a list of documents verifying such characteristics as your credit history, references, and the validity of your business. Having a well-defined company mission will improve your chances of obtaining this type of business funding.
3. They Analyze, Analyze, Analyze. MCAs want to see weekly and monthly receipts as well as measure the amount of time it takes your customers to pay up. They also will check-up on your terminal activity and help you to keep your processes runnning smoothly.
4. They Keep an Eye on Faud. A robust process of checks and balances esnures that business don't take advantage of this financial arrangement.
5. They'll Know your Customer. And your industry. So that means that they have a pretty good idea about your business model and how sales numbers and profits should look at the end of the day.

Now that you know what merchant cash advance providers look for in a business partnership, you can use this information to successfully obtain the start-up capital you need to get your business idea off of the ground.

For more information on the business funding process from the merchant cash advnace side, check out Best Practices for Merchant Cash Advance Providers: Assessment of Risk - AdvanceMe, Inc.