Monday, May 19, 2008

Can I Use an MCA for Start-up Costs?

In most cases, no, you cannot use a Merchant Cash Advance for start-up costs.

Qualification for a Merchant Cash Advance requires a review of up to 12 months of credit card processing statements. A start-up will not be able to produce these statements, and so a brand new business owner will have difficulty qualifying.

Can I Use My Projections of Anticipated Credit Sales?
Unfortunately, no. Merchant Cash Advance underwriters have years of experience in understanding how businesses cycle and operate, and even they are not able to accurately predict future credit card sales without examining statements and specific historical data.

Lots of businesses sound like great ideas. But how they look on paper and how they behave in the marketplace might be two entirely different things. Credit card processing statements help to remove the guesswork. The provider can see in black-and-white how well your small business is performing.

Do You Always Need 12 Months of Statements?
Not usually. A reputable Merchant Cash Advance provider will try to quickly get the most accurate picture possible of your small business. Usually, most providers can get a clear picture of what to expect with 4-6 months of statements, sometimes it takes more--it really depends on the complexity of the deal. Every business and every deal is different. A full year’s worth of processing statements will help to show your potential provider any seasonal trends or sales patterns worth deeper investigation.

Do be wary of a provider who does not ask to see at least 4 months worth of activity. It is very difficult (if not impossible) to understand how well a business might perform without looking at enough historical data. Keep in mind that if a provider asks to see more than 4 months of statements, it is normally just an effort to better understand how to best serve your business needs.

Where Else Might I Go for Start-up Resources?
Many small business owners try the Small Business Administration (SBA) (found at: While the requirements for SBA assistance can be fairly strict, a qualified business owner can find many worthwhile resources through the SBA and its many programs.

Another good option for some entrepreneurs to get started is using angel investors. Angel investors might act independently or as part of an angel-investor network. There are regionally-focused investors and angel investors specific to many industries. To start a search for angel investors, compiled a very handy list of resources:

Other common sources for start-up funding could include friends and family, venture capitalists (, and of course, banks.

What do you think?
Is start-up money the only thing keeping you from launching your own business?