Merchant Cash Advance...why underwriters look at your credit

So you are thinking about getting a cash advance and want to know what is involved in the approval process. Maybe you have applied for a bank loan and been declined because of credit and you may be concerned that the funding company may do the same.

Let’s take a look at the underwriting process and in a couple of minutes I will give you a better idea of how they will see it through their eyes.

When applying for a bank loan, credit is often times the most important factor in whether or not they approve a loan. In most cases, poor credit will result in an automatic decline unless you have significant collateral or assets to pledge against a loan. Typically your credit is the only way for banks to tell whether or not they will get repaid. Loans are typically longer terms, possibly as long as 10 years. The likelihood of a business being around in ten years is unlikely to start so the possibility of the bank having to try and collect is something they must consider. They will look at your credit to see how well you have paid back other obligations and use that as a gauge to determine whether or not you will pay them back in the event your business fails.

A merchant cash advance is different in many ways and underwriters look at it through a different set of eyes.

First they will pull your credit and look for a number of things. Credit score alone is not the only factor. Here are the specifics they will look at on your credit report.

As a generality above a 520 has a possibility of getting approved but certainly not the only factor. It is how you got to a 520 that is more important.

1. Mortgage: This is one of the most important factors they will look at. If you are 30 days late or more on your mortgage, underwriters may think you will use the funds not to grow your business but to take the money personally and save your home. Some companies may overlook 30 days late, but 60 days or more is a problem.

2. Tax liens: A tax lien is not necessarily a problem as long as you are on a repayment plan and you have some documentation to prove it. They may request a cancelled check payable to the IRS along with your repayment plan to show that you are honoring your obligation.

3. Civil Judgements: These are handled similarly to tax liens. Proof of a payment plan is going to be required.

4. Hospital Bills: Often times an unforseen accident or illness can result in medical costs that very few can pay for immediately. Underwriters understand this and some may not weigh this heavily in their decision making process.

These are the most important factors funding companies will look at. The next set of factors they will consider is how well your business is performing and what I would call “other things underwriters look for”. So if you have been turned down by a bank and you know your credit is not good, don’t be too discouraged. Merchant Cash Advance companies look at credit differently and your situation may be perfect for some companies.

Merchant Cash Advance...other things underwriters look for

So you are thinking about a business cash advance but want to know very simply, will I get approved? Funding companies look at things differently than a bank for many reasons. I will give you a glimpse of how they think. Other than credit there are many things they look at. Here are some items most companies will look at.
1. Merchant Statements: Companies will require between 4 months and 12 months of merchant statements. Your processing history will give them an idea as to how consistent the volume is and what they can expect in the next 6 to 12 months. Underwriters are looking at a number of factors including average ticket, number of batches per month, and number of charges per month. Almost all companies typically like to see a minimum of 14 batches per month although one I know of doesn’t look at this at all. So if you are a marina that processes its slip rentals on the first of every month, most won’t like it but one will. They also want to see how your volume is trending. If they look at last February and compare it to this February, how does it compare? If your volume is down 50%, that may concern them. If it is a slight decline, flat, or growing then they may be ok with what they see.
2. Bank statements: They will look at bank statements to see a number of different things. If you have a number of NSF’s, that is not a good thing. If you had a tough time 5 months ago but have since cleared it up, they will often times take that into account. They will also look at average balance to see if it looks like you are on the brink of going out of business.
3. Lease agreement: All companies will want to see the lease for your business and make sure you will still have a place to do business during the repayment period. If the landlord doesn’t renew your lease and kicks you to the curb, you are effectively out of business and can’t repay the advance.
4. Landlord interview: All companies will perform a landlord interview and make sure your rent is current and that your lease is the same as you sent over. If your lease is late, you may still get funded but they may make a stipulation that you must pay the landlord first, with the remaining funds going to you.
Underwriting guidelines are significantly different for a merchant cash advance and much more lenient than a bank. If you need funds for your business, strongly consider a business cash advance. For specifics information go to: http://www.merchantcash.com

Merchant Cash Advance...critical things you need to know!

Ok, so you are past the stage of finding out how a merchant cash advance works and into the stage of finding a place to get one. There are a lot of providers to choose from and some things you need to be aware of before diving in.

Get multiple quotes
This seems obvious but essential. This is essential because rates and terms vary amongst the cash advance providers. There are probably twenty different criteria to consider when looking at different business cash advance providers. Some have rates as low as 1.18 but require better credit, while others have rates of 1.41 but take someone with a 525 credit score. Most require you to change credit card processors while others don’t. The problem with trying to get multiple quotes is typically you only get one from each funding company. Some merchant cash advance companies represent multiple funding companies. Going to a company like that allows you to provide information once and get as many as five quotes with one click. Hopefully these quotes are assembled side by side so you can easily see the different requirements and rates of the different companies. Some companies will even offer you an instant quote. Fill out your information, press submit, and voila! Five quotes.

Warning! If someone offers you a rate that is considerably higher than others, ask why.
Sometimes the higher rate is justified, sometimes not. Companies get paid a percentage of the funding amount. That is not necessarily a bad thing because they have a vested interest in getting you the money that you need. The bad thing is they also get paid more if the factor is higher. Kind of like the finance guy at the car dealership. The question here is, if he quotes you 1.41, could you have qualified for 1.21?

What kind of deal can I expect?
Will a little advance knowledge and some due diligence, you will make yourself aware of what is possible. If you have pretty good credit, above 625, you can expect a better deal than the person with a 525 and for good reason. The company is trying to determine what the likelihood of the advance being repaid in full. If you are married to your processor and don’t want to change, there are options available to you where you don’t have to change.
So if you are in need of money then a merchant cash advance can be a good option if you have some advance knowledge of what is available. Use this information and don’t be afraid to ask a lot of questions. For specifics information go to: http://www.merchantcash.com