The Cash Advance Process

When applying for a business cash advance, you will want to have all of your references, sales history and any other relevant documents on-hand. Many providers offer online applications that take a short while to complete requesting information about your business, such as current financial statements and recent credit card transaction reports.  A provider is more concerned with your ability to operate your business and pay back the loan quickly than in your credit history, so providers will not necessarily request a credit report.  The information requested varies depending on the provider you work with and the specific industry your business operates. 

Approval can take anywhere from a few hours to a few weeks, but most providers are able to approve a candidate within four to seven days.  The provider will contact you with an offer of an advance, and provide you with an advance amount.  You will also receive a safe retrieval rate, which is the percentage of daily credit card sales they can safely collect.  If agreed upon, the provider will arrange to have this amount transferred daily from your account to theirs. 

Since repayment is made automatically as a portion of your daily credit card receipts, and the amount will vary based on the day, the provider will need to have access to your merchant account.  Your current credit card processing service may not allow another party to access your account and make transfers.  If this is the case, it might be necessary to switch to a different credit card processing service that allows for the automatic repayment.  Check with your provider and your credit card processor before accepting a cash advance or agreeing to repayment terms.

Once you have decided on a provider, been approved for an advance, reviewed repayment terms, and made sure your processing service is compatible with the agreement, a contract is drafted that specifies all the terms of your agreement with the merchant cash advance provider.  The contract should clearly state the advance amount, the daily return rate, the repayment schedule (the length of time it will take you to pay back the advance), and what the provider can do to recover in the event you are unable to make your payments as scheduled.  Usually, if you are unable to make payments as specified in the contract, the provider can demand the full remaining balance of the advance.

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