Is your small business not able to acquire financial assistance due to bad credit? Are you tired of listening to “NO” from banks and financial institutions because of your poor credit history? Is your company looking for business funding with bad credit?
If your answer to all these questions is a yes, then you should opt for financial aid from the providers of a Merchant Cash Advance. Your business venture can get all the financial support that it needs from the providers of Merchant Cash Advance. The biggest plus point about the companies offering MCA is that they are ready to offer business funding to the companies, which have a poor credit history.
This business funding with bad credit option enables small companies to purchase new stock, covers payroll, and expand the business. Merchant cash advance companies are different from other companies offering loans because they offer financial assistance to companies having normal, poor, or no business credit. There is transparency in the procedure of providing cash advance by the MCA companies. Moreover, the application form is available online and small companies are not required to pay any application fee.
Due to the existing shaky conditions prevailing in the economy, small companies having poor credit face a lot of obstacles in acquiring a loan from banks and financial institutions. Because of the increasing risks, the interest rates on business loans are very high and the time period to make a repayment is short as compared to the ones having good credit. The commercial loans have a really long turnaround time and it takes a lot of time to get approved. Being able to procure working capital in such conditions is very difficult for small business.
What is bad credit?
Credit is a way through which lending companies rate the history of debt repayment of small organizations. Small enterprises that have a credit score lower than 629 are considered as the ones having poor credit by various companies that offer financial assistance. Bad credit basically means a bad history of repayment. If you apply for a business funding with bad credit from community banks, small banks, financial institutions, and credit unions, then there is a possibility that your loan application will get rejected.
Impact of bad credit on business financing
It is nearly impossible for a firm to get business funding with bad credit. Neither a lender of small business administration nor a conventional bank will be ready to offer financial support to a small firm that had issues of repayment previously.
There are a certain number of small business lenders that are ready to offer fudning to small companies having poor credit. But, as these loan providers are taking a huge risk, they charge a higher rate of interest. Moreover, the date of repayment in case of such kind of loans is also going to be sooner as compared to the conventional ways of financing as the lender will not be ready to wait for longer periods.
Merchant Cash Advance to the rescue
As stated earlier, an MCA is the best financing option for small companies, which are looking for business financing. It is nothing but the sales of future receivables of the business. An MCA is appropriate for companies, which have lower than stellar credit. This option of financing is also suitable for small firms having immediate funding requirement.
Moreover, this business funding with bad credit is the best option for the small enterprises that cannot produce business and financial documentation. The biggest advantage that a small company can get from a Merchant Cash Advance is that they are not required to provide any collateral. Additionally, they offer a smooth procedure of repayment. The terms of repayment of a merchant cash advance are flexible. Moreover, you don’t require a business plan to procure a loan.
A Merchant Cash Advance is particularly utilized by the companies that do not have a perfect credit score; there are a certain number of cash advance companies that only offer financial assistance to small business.
Application procedure of obtaining a Merchant Cash Advance
A merchant cash advance enables a business owner to receive the payments on credit cards. This source of business funding with bad credit is very easily available and has a very simple application process. The time period that a Merchant Cash Advance takes to get approved is from an hour to a few days. Once the application gets approved then the amount gets transferred into the account of a small company within a period of 2 days. The procedure of application is not as complex as conventional loans. A small company has to follow the following steps in order to apply for a Merchant Cash Advance.
- The application form of an MCA is a document of 1-2 pages in which the business owner is required to fill the details of social security number, Business tax ID, and other important details about the company.
- In the next step, the borrower who needs business funding with bad credit will be asked questions regarding the records of credit cards and processing payments of the last few months. Moreover, the lender can ask for financial statements of the small company.
- After the submission of documents, the next step is approval. An MCA application gets approved within a period of 24 hours.
- There is a chance that the Merchant Cash Advance providers may ask the owner of the small business to change their processor of credit cards. Changing of the credit card processor may seem inconvenient but it is an essential requirement for getting an MCA approved.
- It is very important to finalize and note down every minute detail while striking a deal with the MCA providers. The proprietor should understand every detail related to the deal and initial period of making payments.
- In the final step, the providers of Merchant Cash Advance will transfer the amount of business funding with bad credit into the account of business proprietors. The repayment of MCA will be done from the account of the merchant, which will be done automatically.
Uses of a Merchant Cash Advance
A traditional lender of business funds will always put forth some conditions regarding the utilization of finances but a company offering Merchant Cash Advances does not impose any constraints on the small companies regarding the use of business funds. But that does not give the power to the small companies to buy real estates. Small firms can enjoy the flexibility of using this business funding with bad credit to meet the daily requirements of the business like upgrades, expansion, emergency uses, payroll, purchases, bills, taxes, hiring manpower, and buying inventory.
Various types of Merchant Cash Advance
A short-term MCA is offered for a period of 2 to 6 month. This type of small business funding with bad credit is provided to the companies having extremely poor credit, limited funds, and inconsistent cash flow. It is also offered to the organizations that already have abundant cash advances.
Long-term Merchant Cash Advance is a cash advance that is provided for a period of more than 12 months. This kind of business funding with bad credit is also called 1st position advance, which means that they have only one type of cash advance.
c) Multiple positions
A second or multiple positions MCA is the type of cash advance, which is obtained from the one that has already been provided. Additional position for business financing with bad credit can be the second position, third position, fourth position etc.
A cash advance of consolidation is the business funding with bad credit, which is used to purchase another type of cash advance. Every provider of the consolidation cash advance has its own requirements. There are a certain number of cash advance providers that ask for additional amount after the repayment of the original amount whereas there are some MCA providers that do not ask for any additional money.
Read More: The Case for Cash Advance Companies
Different types of MCA repayments
According to this plan of repayment of business funding with bad credit, all the sales of credit card are transferred into the lockbox from where the finance is distributed amongst the small firms and loan providers on the basis of agreed proportions. As this type of repayment can get split with the company of credit card processing, there can be a delay in the receipt of funds by the merchant.
b) Split advance
In this type of repayment, the company offering a Merchant Cash Advance receives the repayment by taking a fixed fraction of credit card sales of the merchant. Unlike the repayments of Automated Clearing House, this kind of paying back is done through taking a proportion of the sales of credit card processing.
c) Automated Clearing House advance
Under this type of repayment, the remittances are done by using an Automated Clearing House. A fixed amount of repayment is transmitted from the account of the small business owners to the cash advance provider’s account.
So, if your small business is looking for a source of finance, then Merchant Cash Advance is the most appropriate choice for you. This option is considered as the best option for small business funding with bad credit.