Merchant Cash Advance FAQs
As a Merchant Cash Advance provider, we have heard a ton of questions from interested businesses. Here are some of the most common ones!
1. Why would companies choose Merchant Cash Advance over traditional bank loans?
There are a variety of reasons a company would choose Merchant Cash Advance over more traditional financial products. MCAs have a faster turnaround time, which lends well to expansion or rapid scaling. Some businesses use their advance to bring on new employees to handle an increase in volume, or to buy new equipment to help them take on big jobs. Some need to make expensive repairs quickly in order to continue operating their business, and some simply prefer the shorter payment terms and the flexibility that MCAs provide.
2. Will my advance cost me more over time like a loan does?
Loans have an interest rate, and the amount paid is dependent on how quickly it is paid in full. The payment is generally fixed for the entirety of the loan. This is not true of MCAs. For MCAs, the daily or weekly debit amount is flexible, as MCAs are only taking a percentage of the business’s overall sales. So if your revenue is down, we can adjust your payment amount accordingly.
3. Do MCAs hurt your credit?
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, MCA itself is not usually reported to credit bureaus in the same manner as other, more traditional financial products.
4. What are the fees and costs?
- Factor rate. An MCA is not a loan — it does not accrue interest and there is no APR. However, it does bear what we call a factor rate, which will fluctuate from funder to funder. All MCAs have a factor rate, so the best way to ensure you’re getting the best rate is by shopping around. Be careful, though, as many funders out there will pull your credit score in order to get you a quote, which could damage your score. To find out if a funder plans to pull your credit, simply ask them — they are legally required to tell you.
- Commission. Keep an eye out for the commission amount your broker receives. At Elevate Funding, when we bump up broker commission, it does not come out of your pocket. Their commission bonuses do not compromise our valued clients getting the best rates possible.
- Funding fees. Funding fees are the costs the funder incurs while helping you get funding — this typically includes the use of 3rd party vendors. At Elevate, we keep these fees simple. For MCAs over $6,500, we charge a flat $500 fee, which covers your ACH/Lockbox. We even waive this fee for advances under $6,500, and we charge no fees for clients making payments directly from a supported credit card processor.
5. Can I get approved even if I have bad credit?
Yes, you can still get approved even if you have poor credit. MCAs are more forgiving of past financial difficulties– no credit, bad credit, bankruptcies, liens, judgments, foreclosure, criminal charges. At Elevate, we believe your success as a company lies in your current performance and revenue, and we don’t think it’s necessary to go poking around in your past.
6. How long does the approval process take? If I’m accepted, when do the funds hit my account?
Our applicants generally get approved or denied within 24 hours upon submitting all required documentation. Once you are approved, your funds can hit your account as soon as the next business day.
7. What happens if my sales drop and I can’t make a payment?
When you take out funding with us, you sign a Future Receivables Sales Agreement. This agreement states that your sales performance will be re-evaluated on a regular basis to ensure your daily payment amount is in line with the agreed-upon payment percentage. If your sales have deviated, we will adjust your payment amount accordingly. We even offer a self-service feature, allowing you to expedite this review process all on your own.
8. How many times can you request payment hold before additional fees incur?
If you must go longer than a week on a payment hold, there is a one-time fee of 25% of your weekly advance amount.
9. When do I qualify for more funding?
Our Flex Funds program offers clients the ability to take an add-on up to 30% of their original funding amount after three weeks of consecutive payments. We also allow eligible clients the chance to renew their advance once they are 55% paid in on their current advance. This gives you peace of mind and assurance that the funding you need soon is lined up and ready to go.
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.
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Revenue-Based Finance is formerly and alternatively known as Merchant Cash Advance, or MCA.
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