Merchant Cash Advance Bad Credit
Having bad credit may affect your ability to obtain money for your business through traditional financing methods. Small businesses and startups often have little credit or bad credit from the beginning and may not have enough revenue yet for a business loan. In addition to a loan, having bad credit can make it near impossible to obtain a credit card.
If you’re stuck in this situation, there’s still hope. You can obtain a merchant cash advance, even if you have bad credit. With this advance, you have access to the capital you need to run your business. Getting a merchant cash advance for bad credit may not be the cheapest option, but it is a great way to get your foot in the door while getting the money you need.
Table of Contents
- What is a Merchant Cash Advance for Bad Credit?
- The Effects of Bad Credit
- Business Finance Options for Low and Bad Credit
- Merchant Cash Advance Repayment Options
- How Much Money Will My Merchant Cash Advance Qualify For?
- I Have Bad Credit. Is a Merchant Cash Advance Good for My Small Business?
- How much do you need?
- How to Get Approved for a Merchant Cash Advance
- What Can a Merchant Cash Advance Be Used For?
What is a Merchant Cash Advance for Bad Credit?
A merchant cash advance is an alternative to business financing for those with no, low, or bad credit. While a traditional loan may require collateral, in addition to a large monthly payment, a merchant cash advance will give you cash now. The lender will take a small percentage of the money from your sales.
Approval for a merchant cash advance is not based as heavily on your credit score. Having bad or low credit is okay because the decision is made off of your business sales, which are used for repayment. Approval rates for a merchant cash advance are as high as 90%, and the application process is quick and easy. Approval usually takes anywhere from 24 to 48 hours, and upon approval, your money is deposited into your bank account as quickly as the next business day.
Merchant cash advances have no loan origination fees or pre-payment penalties. Borrowing a cash advance can be done with a short-term or a medium-term repayment plan. Instead of high-interest rates, a retrieval fee is added on to your total cash advance to pay back.
The Effects of Bad Credit
Your credit score determines how either a bank or finance company will view you when applying for a loan or credit card. With good credit, you get better financing terms, such as more money and lower interest rates. Having bad credit will prevent a bank from wanting to give you a loan. If they do provide you with capital, it will generally mean less money and a higher interest rate. Banks do not often want to lend to those with bad credit or a low credit score.
Having working capital for your small business can be a deciding factor on the success or failure of your business. You may want to hire new employees, buy additional inventory, or buy or upgrade existing equipment. Not having access to financing options to accomplish these goals can greatly restrict your rate of growth.
Business Finance Options for Low and Bad Credit
Obtaining financing for the capital you need for your small business can be difficult for people with low or bad credit. One option you have is to attempt to obtain a traditional loan from a bank or finance company. Approval for traditional loans generally requires a high credit score in order to get a favorable interest rate, or even approved at all.
Another option is to obtain a loan and secure it with company assets. While this may be an option for some people with low credit, it requires you to offer up vital assets as collateral, which provides a much greater risk to your small business if an emergency occurs and for some reason are late on a payment. One more option for small business owners is to obtain a credit card. Although this is a good choice for general expenses and some larger purchases, a credit card may be difficult to get with low or bad credit. It often comes with a very high interest rate and a low credit limit.
As a small business, you also have the option of getting a merchant cash advance. A merchant cash advance gives you the money you need immediately, and repayment is provided by giving back a small portion of your revenue of sales you make from your business. While getting a merchant cash advance may not be the cheapest option to obtain the financing needed for your small business, unlike traditional lending, it is not based largely on your credit score and credit history. This makes it a viable option for small business owners with bad credit, low credit, or no credit at all.
Merchant Cash Advance Repayment Options
There are a few options for repayment of your cash advance. Due to the nature of a merchant cash advance, repayments methods are simple. This allows you to continue conducting business without the added stress of worrying about repayment.
If your small business uses and accepts credit cards, then a special agreement is made between the credit card processor and the merchant cash advance company. They will automatically deduct the money owed as a small percentage of each sale from your business. This money is deducted when your credit card receipts are batched, usually at the end of each business day. This type of repayment is convenient because it does not require any additional work, and only a small percentage of money is taken out of each sale. This prevents any hardship on your revenue and ensures you pay back what is owed.
If you are a small business owner and you do not accept credit cards, then the cash will be deducted from your bank account for repayment automatically by the merchant cash advance company through ACH.
How Much Money Will My Merchant Cash Advance Qualify For?
The amount of money you are approved for with your merchant cash advance is determined by a number of factors. Due to not taking into account your credit score like a traditional small business loan, amounts can vary depending on your monthly sales through the last three to six months. Most of the time, a merchant cash advance is approved for anywhere from 50% to 250% of your total credit card transactions.
I Have Bad Credit. Is a Merchant Cash Advance Good for My Small Business?
Many small business owners need financing options for several reasons to keep their business successful and growing. This can be a need for working capital and needing extra money to pay bills and buy inventory to keep your small business running. You may also want to grow or expand your business. Doing this may require the hiring of additional employees, which requires more payroll expenses while waiting for your investment of a new employee to pay off. You may have taxes coming up for your small business that will hurt your ability to make other purchases. An unexpected emergency expense can completely threaten the well-being of your small business.
Stressing about all of these factors while running a small business can hurt performance further. If you are a small business owner, with low credit, bad credit, or if you don’t have any credit yet, it may very well be difficult to find financing. Getting approved for a credit card as a small business owner with a low credit score can also be difficult, and the outcome could result in a limited credit limit and high interest rates.
A merchant cash advance for bad credit is an option for small business owners who need money now and don’t have the credit for a traditional loan. You can focus on doing more business and expanding. And since repayment is often based on sales, your customers will be repaying this advance for you each time they swipe.
How much do you need?
How to Get Approved for a Merchant Cash Advance
Getting approved for a merchant cash advance is relatively easy, even with low, limited, or bad credit. As mentioned earlier, approval rates are quite high for these funds since credit is not the largest factor. Because of this, small business owners with bad credit can obtain approval for a merchant cash advance as long as you have demonstrated sales. Remember, the repayment will come from these sales.
To apply for a merchant cash advance, you will often need to provide the following financial documents with your application:
- Driver’s License
- Bank Statements
- Copy of your Credit Report
- Processing statements for your Credit Cards
- Business Tax Returns
- A Voided Business Check
What Can a Merchant Cash Advance Be Used For?
Getting a merchant cash advance gives you the money you need now. It can be used for a variety of needs for your small business. There are hardly any restrictions on what you’re allowed to spend your cash advance on, giving you the desired flexibility to spend your money on what you need most to ensure the success of your small business.
You can apply these funds towards items like:
- Bills and Expenses
- Emergency Situations
- Working Capital for your Small Business
- Taxes Owed
- Hiring New Employees
- Making Needed Improvements to our Small Business
- Investing in New Inventory to Increase Sales
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