Who Qualifies for a Business Cash Advance Loan?
Since repayment of a business cash advance is based on your business future sales, the business cash advance provider bears the bulk of the risk in the transaction and requires a fee for doing this. In order for the provider to make sure that they maintain cash flow, they have certain criteria in order for a business to qualify for a cash advance loan.
Generally, providers require that a business meet most of the following qualifications:
- The business should maintain a certain amount in monthly credit card transactions (most providers require at least $3000)
- The business is not working with another merchant cash advance provider
- The business does not have any existing liens on business-owned property
- The business must provide financial information and proof of past sales
While the requirements for a merchant cash advance are not as stringent as those for a bank loan, some providers may require additional, specific qualifications. For example, some only offer cash advances to businesses that have been operating for at least a year, or that have at least a year remaining on an existing property lease. Some providers also require a plan outlining how the advance will be spent. Similar to investors, you need to show the provider that you have a plan in place.
Remember, the provider only recoups its costs if your business is able to remain functioning and profitable, so it needs to evaluate whether or not buying your future sales will pay off. Your business doesnt need to have stellar credit, but you do need to show that it is financially sound: a steady revenue stream, a proven history of reliable sales, and reasonable operating costs. The more information you have that shows the provider that your business is a good bet, the likelier you are to get favorable rates and repayment terms.