Step 1: Submitting an Application
A standard Merchant Cash Advance application requires:
A completed funding application or form
3 of the most recent bank statements for the business
Owner's drivers license or another legal form of ID
A voided check
After the funder receives and approves the application, it'll move to the approval/offer stage.
Step 2: Approval/Offer
Once the funder fully or partially approves a merchant's funding request, the merchant has a few options:
Accept the offer
Decline the offer
Bargain for a lower rate and exchange it by lowering the term, or increase the term and exchange it by increasing the rate.
For larger deals over $150K, additional financial information may be requested:
Work in Progress Report
Please note that these requirements can differ from funder to funder.
Step 3: Contract Creation
Once an agreement is reached on the offer, the funder will create a legal contract for the advance and payback amount.
Merchants should carefully review their contract and discuss any questions with their funder.
Step 4: Bank Verification
The contract will have two or three options for a bank verification method. The purpose of which is to verify statements and ledgers that were provided to the funder.
Verification options are typically divided into manual and software login. Requirements may differ with larger advances.
Step 5: Merchant Interview
After verifying banking records the funder will contact the merchant to conduct a phone interview. Typically, this is done by the underwriter on the file to better understand the merchant and their business operations.
Step 6: Final Review & Funding Call
After passing the merchant interview, the funder will review the information on the business before conducting the funding call. Once the review is complete, the merchant will receive a call to confirm their advance details.
Step 7: Renewals
Once 50% of the repayment amount on an advance has been paid back, that merchant is eligible for a new advance (renewal) from the funder. The renewal provides a merchant with an additional lump of capital, usually at a lower rate than before for use in business operations.
Merchant Default in Merchant Cash Advance
Payments are consistently missed or are incomplete
Avoiding communication with the funder and any of their departments
A debt settlement or negotiation agency is hired
Options in Merchant Default
Talk to the funder for your options
Fraud & Scams in Merchant Cash Advance
A full length blog will be provided and linked here by October 2022 on the listed topics below.
Debt Settlement/Collection Agencies
Have no legal authority to settle or negotiate on the merchant's behalf
Will charge an upfront fee, or other type of fee
Fraudulent claims about low-interest loans, typically contingent on taking out an advance with them.
Pledging lower payments than as stated on the agreed upon contract.
Condones Stacking: Guides or Assists merchant in taking out multiple advances from various funders without notifying them prior. Funders could not calculate the merchant's new advances into their advance model. The repayment amounts will USUALLY force the merchant into default.