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.