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MCA Myths, Debunked. Part 5: “MCAs Wreck Your Credit.”

The Merchant Cash Advance (MCA) industry is relatively young, and due to a few bad players—MCA companies that aren’t transparent about their terms and engage in deceptive practices—there is a lot of misinformation floating around about the MCA space as a whole.

With this monthly article series, MCA Myths, Debunked, we aim to bring answers and clarity to the ambiguity and misinformation around MCAs.

In this article, you’ll read information and advice from three MCA industry leaders who have a combined 30+ years of experience in the sector.

Pictured left to right:

Heather Francis, Founder & CEO, Elevate Funding

Ken Peng, Director of Business Development & Marketing, Elevate Funding

Reynold Jackson, Senior Underwriting Manager, Elevate Funding

Why do you think it’s a common misconception that taking out an MCA will wreck your credit? Does taking out an MCA impact credit directly, indirectly, or not at all?

HF: Any transaction that is financial in nature and has a mutual agreement in place has the ability to affect one’s credit through a default process if awarded by a judge. That being said, the MCA product itself is not usually reported to credit bureaus in the same manner as other financial products out there. The misconception of wrecking credit comes from brokers “shotgunning” applications out to funders who pull credit to review for eligibility. This practice has been curtailed over the past years. Continued education of business owners and the sophistication of alternative finance/fintech providers continues to provide the ability to shop around without exposing credit risk or personal information.

KP: Part of that can be attributed to the perception of MCAs being some kind of last-ditch resource for small business owners. There are also funders out there who can impact a merchant’s credit score because they are deceptive about whether or not they pull an applicant’s credit. Or the classic example where a broker tells a merchant that they will not pull credit, but then shops their application out to 10 different funders who all pull credit. Next thing you know, the merchant’s credit score has been affected because of 10 credit pulls in rapid succession. At Elevate Funding, we do not pull credit on applicants — not even soft pulls. Regardless, beyond these practices, a Merchant Cash Advance is not a loan product and therefore does not affect a merchant’s creditworthiness.

Do MCAs and loans impact merchant credit in different ways? What are the key differences?

HF: Since repayment on an MCA is paid out when receivables come in and not on an amortization schedule, MCA providers cannot report directly to credit bureaus on payments being current. They can, however, have defaults through court recorded judgments that affect one’s credit.

KP: Credit scores help measure a person/company’s future ability to pay back a debt. While this is helpful for lenders when determining an applicant’s ability to pay back a loan product, MCAs are based on revenue and is a purchase of a company’s future receivables so they have access to future revenue immediately. It’s our belief that while credit scores can provide some idea as to a person’s history of payments, it doesn’t necessarily tell us the whole story or provide us with any insight into their receivables. Elevate does not pull credit nor do we look at a merchant’s credit score when we make our underwriting decisions.

What advice would you give a small business owner who is concerned about the impact an MCA may have on their credit?

RJ: If you ever would like clarification on whether an MCA or loan will affect your credit score, just ask. The lender must get your approval (by law) before conducting a hard inquiry as part of their decision-making process. Also, ask if they report your repayment to all three credit bureaus, as some will only report to one credit bureau. Asking questions and conducting research are steps anyone can take in ensuring they get the product that fits their situation the best.

At Elevate Funding, honesty and transparency are at the core of what we do. We genuinely believe that MCA is the best funding option for business owners who find themselves in a variety of circumstances – whether they are in a slump, need quick funds to rectify an unexpected emergency, or if they’re looking to expand and increase their market share.

Our goal? To continue to advocate for our merchants and fund the companies that make America’s small business landscape so interesting, valuable, and diverse.

If you need funding and wish to speak to someone now, please call us at 888-382-3945 or click here to send us an inquiry. One of our teammates will get back to you as soon as they are available.


Revenue-Based Finance is formerly and alternatively known as Merchant Cash Advance, or MCA.