How to Qualify for a Merchant Cash Advance (MCA): Tips and Requirements

A Merchant Cash Advance (MCA) can be a valuable financing option for businesses needing quick access to capital. Unlike traditional loans, MCAs focus primarily on your business’s revenue, particularly credit card sales, rather than your personal or business credit score. This guide outlines the key requirements and tips to improve your chances of qualifying for an MCA.  

Key Requirements for MCA Approval:

While each MCA provider may have slightly different criteria, the following are the most common requirements:

1. Consistent Credit Card Sales: This is the most important factor. Providers want to see a steady flow of credit card transactions. The higher and more consistent your sales, the better your chances of approval and the more favorable the terms you’ll likely receive.  

    
   • Tip: Regularly analyze your credit card processing statements to identify any trends or inconsistencies in your sales volume.  
      

2. Time in Business: Most providers require businesses to be operational for a minimum period, typically ranging from 3 months to 1 year. This demonstrates stability and a track record of generating revenue.

   • Tip: If you’re a newer business, focus on building a solid sales history before applying for an MCA.

3. Minimum Monthly Revenue: Providers often set a minimum monthly revenue requirement, which can vary depending on the provider and the desired advance amount. This ensures that your business generates enough revenue to comfortably handle the daily or weekly repayments.  

    
   • Tip: Increase your sales efforts to meet or exceed the minimum revenue requirement.

4. Business Bank Account: You’ll need an active business bank account where the advance can be deposited and from which repayments can be automatically withdrawn.  

    
   • Tip: Ensure your bank account is in good standing with no overdrafts or excessive negative balances.

5. Limited Outstanding Debt: While not as critical as with traditional loans, having too much existing debt can negatively impact your approval chances. Providers want to ensure you can manage the additional financial obligation of the MCA.

   • Tip: If possible, try to reduce your outstanding debt before applying for an MCA.

Documents Typically Required for MCA Application:

• Credit Card Processing Statements: Usually for the past 3-6 months. These are the most important documents, as they verify your credit card sales volume.
• Bank Statements: Usually for the past 3-6 months, to verify your overall financial health.
• Business License or Incorporation Documents: To confirm your business’s legal status.  
   
• Voided Business Check: For setting up automatic repayments.

Tips to Improve Your Chances of MCA Approval:

• Maintain Consistent Sales: Focus on strategies to increase and stabilize your credit card sales. This is the most significant factor in MCA approval.  
   
• Improve Cash Flow: Manage your expenses and improve your overall cash flow. This demonstrates financial responsibility.
• Keep Accurate Records: Maintain organized and accurate financial records, including credit card processing statements and bank statements.  
   
• Address Any Credit Issues (If Applicable): While not the primary focus, addressing any significant negative items on your business or personal credit report can be helpful.
• Shop Around and Compare Offers: Don’t settle for the first offer you receive. Compare terms, factor rates, holdback percentages, and fees from multiple providers.
• Understand the Terms: Carefully review the MCA agreement before signing anything. Make sure you understand the factor rate, holdback percentage, repayment schedule, and any associated fees.

What if You Don’t Qualify?

If you don’t qualify for an MCA, consider these alternatives:

• Improve Your Credit Score: Focus on improving your business or personal credit score to qualify for traditional business loans.
• Apply for a Traditional Business Loan: If you can meet the requirements, a traditional loan usually offers lower costs.  
   
• Explore Other Financing Options: Consider other options like business lines of credit, invoice financing, or SBA loans.

Conclusion:

Qualifying for an MCA is primarily about demonstrating a consistent flow of credit card sales. By focusing on this key factor and following the tips outlined in this guide, you can significantly improve your chances of approval and access the capital your business needs. Remember to compare offers and fully understand the terms before making a decision.