Is A Merchant Cash Advance A Scam?

All rumors about a merchant cash advance scam are untrue. These rumors are perpetuated by people who don't understand what a merchant cash advance is. A merchant cash advance is not a scam. In fact, it is a fast and convenient way to receive a relatively large amount of funds for your business in about a week.

A bank loan, on the other hand, requires that you satisfactorily fill out a substantial amount of paperwork before approval. Once your loan is approved, it may take two or more weeks until the funds are actually available.

Additionally, it may be difficult to obtain a bank loan (even if you have an excellent credit rating) simply because of the industry your business is in. Usually banks are reluctant to offer loans to beauty salons, restaurants or retail stores because they have unpredictable incomes.

Many business owners are not familiar with using a merchant cash advance to finance their business. Those who look into this alternative means of financing can benefit from considerable sums of money. In fact, some businesses may even qualify for more than $500,000.

If you own a beauty salon, restaurant or retail store, a merchant cash advance can be a convenient solution to your cash-flow issues--giving you the capital you need to pay off vendors and pursue an aggressive local marketing plan to grow your business.

How to Apply For a Merchant Cash Advance

When signing up for a merchant cash advance, read the contract thoroughly, understand the terms of the agreement and take note of the fee structure. Unlike a bank loan, you don't need to offer collateral to get funding.

How to Qualify For a Merchant Cash Advance

In order to qualify for this type of financing, you have to meet the following requirements:

1. You must own a business. You won't qualify if you are simply thinking about starting a business.

2. Your business must take credit cards. A lender will offer a sum of money against your future credit card receivables.

3. Your business should not be on the verge of bankruptcy.

4. The landlord of your business premises must be willing to give you a good reference.

5. You must have an acceptable credit score. Since a business cash advance is an unsecured loan, your personal credit history will not play an important role--unless your credit score falls below 500.

6. Since the lender will collect a percentage of your credit card sales, you must have a lockbox, ACH, or split-funding system.

7. If you have a tax lien, you must provide the lender with an outline of your payment plan.

8. If you own a franchise, you must be current with your royalty payments and franchise fees.

9. For proof of your current financial situation, you must provide four months of merchant processing statements and three months of bank statements.

10. You will be interviewed by the lender, and must convince him or her of your ability to comply with the terms of the merchant cash advance contract.

Forget any stories you may have heard about a merchant cash advance scam. While financial scams do exist, they are not related to merchant cash advances.