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MCA Funding Process Overview

Man examining data and charts

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

  • Accounts Receivables

  • Other

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

Merchant Default

Occurs when:

  • 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

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

Broker Scams
  • 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.

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