Monday, May 12, 2008

What are Common Things that Stop a Deal?

While a Merchant Cash Advance (or MCA) is a relatively easy way to get working capital, there are some common business elements that can hamper or even kill a deal. It makes sense to know as much as you can about what to expect from a Merchant Cash Advance deal, including things that might hurt your chances.

These are 5 common things that will usually stop a Merchant Cash Advance deal:

1. Not processing credit card sales. Since this funding is based on a purchase of your business’ future credit card sales, you MUST process credit card sales before you will qualify. Surprisingly, many businesses that apply for a Merchant Cash Advance don’t process any type of credit card sales. Not surprisingly, until they do process regular credit card sales, these businesses won’t get very far with a Merchant Cash Advance application.
2. Not processing enough credit card sales. You may not qualify for a Merchant Cash Advance if your business does not process sufficient credit card sales. For example, if your business takes in $100,000 a month on average but only $500 of these sales are typically attributed to credit sales, you may not be processing a large enough percentage of credit sales to make you a good candidate for a Merchant Cash Advance. And if within the same scenario all but $500 were handled as credit sales, this imbalance might again have an adverse effect on your ability to qualify for a Merchant Cash Advance.
3. An outstanding bankruptcy. If you have an outstanding bankruptcy or one that has been discharged less than a year, you may not be eligible to qualify your business for a Merchant Cash Advance.
4. An adult-oriented business. There are certain business types that most MCA providers simply will not fund. These businesses include (but are not limited to) brand new businesses and adult-themed business (e.g., pornography, etc.).
5. A start-up request. Because this funding normally requires a review of 4-12 months worth of credit sales activity, a start-up will not usually be able to qualify. In many cases, it is best to wait for a full year before applying for a Merchant Cash Advance. It is certainly possible to get funding within your business’ first year, though it may not be as easy as it will be after the first completed year of operation. In addition, it is possible sometimes to use an existing business with a solid track record to fund the start of a new business.

You can find out more about how a Merchant Cash Advance works here.
Wondering exactly what a Merchant Cash Advance is? Get more information here.
Got a more specific question about what stops a deal? Feel free to send it on.

What do you think?
Do you feel you have been stopped or blocked for a deal in the past? Why?


mitch said...
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