Long Island Merchant Cash Advance

Short Term Working Capital  ​​

Questions and Answers

What is it? A merchant cash advance allows a business owner who accepts credit card payments or has other payment or receivables streams to obtain an advance of the funds regularly flowing through the business’ merchant account. A merchant cash advance (MCA) is not a loan, but rather an advance based upon the future revenues or credit card sales of a business. A small business can apply for an MCA and have an advance deposited into its account fairly quickly.

Is a Merchant Cash Advance Right for Your Business? An MCA is an option when a business needs to access capital quickly, has adequate cash flowing through their merchant account each day to make payments on the advance, and the loan purpose can justify the potentially high expense of the advance. And, because credit requirements are typically a lot less than a small business loan, it could be an option for a business that does a lot of credit card transactions every month but has a weak credit profile.

How do I qualify? Your credit isn’t pulled initially but there will be a “soft pull”, which will not hurt your credit at all. Your profit margin is what is looked at closely. Approval for a merchant cash advance is based on your monthly credit card sales. Since a portion of these profits are automatically applied to your debt every month, you must give the lender verifiable proof that you can honor the payment agreement. If you fail to do this your request will be denied.

Are there any restrictions on how the funding is used? When it comes to a merchant cash advance, this is a trick question. The answer is, no. The money can be put toward any business-related expenditure.

What is the interest rate? Merchant cash advance is not a loan but an advance against a business asset. So, there isn’t any principle or interest charge. Instead, the cost of advance is a set fee based on risk factors.

What are the repayment and loan costs? A business that uses a merchant cash advance, can range greatly and you may pay back 20%-40% (or more) of the amount borrowed. This percentage is frequently displayed as a factor rate, which would equivalently be 1.20 – 1.40.
NOTE: There’s a difference between the holdback amount a small business pays every day (as a percentage of their receivables) and the repayment amount for the entire advance. There could, for instance, be a holdback of 15%, and a repayment of 30%, so it’s important for the business owner to understand the distinction.
The holdback percentage is typically based on:
  • The amount of funds a business receives,
  • How long it will take to repay the advance, and…
  • How big the monthly receivables are.
For example, a business is advanced $10,000 and agrees to pay back $13,000. This means the payback, or factor rate, is 1.30 or 30% of the advance amount. Moving forward, the business agrees to have 15% of its credit card transactions withheld by the advance company (the holdback) until the $13,000 is collected. If the business is averaging $14,500 a month in credit card sales, approximately $2,160 would be withheld each month and the advance would be paid back in roughly six months.
Typical holdback rates may range from 10%-20%, though this can vary widely based upon the business and the provider’s evaluation of the borrower’s risk.

How does the payback schedule work? Essentially, merchant cash advance payments are never the same. Due to the nature of this advance, the repayment is a percentage of your future sales and will fluctuate with the pace of your business’s income. Depending on the lender you’re working with, you may be able to get a merchant cash advance with either daily or weekly debits.

How do I repay a cash advance? We make it easy for you. Your payments are automatically deducted every day, based on the amount of your advance and sales revenue, through fixed ACH debits from your bank account.

Will you check my credit? Yes, simply to verify that there are no outstanding bankruptcies, prohibitive judgments or encumbrances. Approval is based largely on the strength of your business rather than your credit score.

I don’t have great personal credit; can I still get merchant cash advance? As opposed to many traditional lenders, we understand the challenges faced by small businesses, so we have partnered with almost 70 firms that have developed leading-edge technologies and processes that allow them to dig deeper and make decisions based on your business track record not just the business owner’s credit score.

Will I be able receive a merchant cash advance no matter what my credit is? YES, we work with merchants from triple A paper all the way down to D and in some cases even lower then that.

How much can I get? You can qualify for a merchant advance from between $2,500 to $100,000, depending on your unique business situation.

Will you work with me if I’m already working with other lenders? Yes, out partners can be in 2nd position all the way to the 5th funding source, possibly to fund the “rejects” or accounts your primary funding source does not want, so you can get more sales.

How long will it take to receive a decision on an application? Within minutes with a complete application submitted and no more than 24 hours after review with other options applications such as fax, email, or mail-in. Funding possible same day or within 48 to 72 hours.

What is it? Invoice factoring is a financial transaction whereby a business sells its accounts receivable to a factoring company to free up their cash; usually to secure working capital to meet expenses, cover payroll or expand their sales.

How does factoring work? You set up an account to sell your invoices for goods or services sold and delivered and you’ll receive immediate cash advance rather than wait on your customer to pay. When your customer makes a payment, they’ll send it to the factor. Factor will then deduct the initial advance you received and applicable fees, and rebate the balance to you. A business sells its invoices at a discount to receive a cash advance within a couple of days instead of waiting 30 to 90 days for a customer to pay the invoice. The invoices are used as collateral in the factoring agreement. The financing company gives the business an amount equal to a reduced value of the unpaid invoices or receivables. When the invoices or receivables are paid, all amounts advanced plus discount and associated fees goes to the finance company and the remainder goes to the business. This in summary is the process of factoring, and may be is repeated as often as needed.

Will continue to bill my customers as usual? Yes. However, you must change the payment address to Factor’s. In some cases, factor will send out invoices directly.

How would a customer know to send or redirect payment to Factor? Your customer will be sent an official but friendly notice of where to send the payment and your invoice will also have that address.

Will you contact all my customers? No, only the customers whose invoices you factor will be contacted.

Am I required to factor all my customers invoices? No, you can pick and choose which customer’s invoice to factor, however acceptance shall be governed by guidelines as established in the factoring agreement.

What if I don’t want my customers to know that I am factoring? That would require a non-notification factoring which is hardly available anymore and mostly only through major banks and subsidiaries, but often with much more stringent qualifying criteria, extra scrutiny, and even making such a request can arouse questions about your client relations, you, and your organization. But why wouldn’t you? Over recent decades, factoring has evolved to become a very fine financing strategy that is used by many astute managers in diverse industries, often in conjunction with, or as a substitute for other financing methods. You might be surprised; perhaps your customer is already familiar with it.

Is there a required minimum or maximum factoring volume? No, but the more the better because higher volume can translate to lower fees.

What does factoring cost? There are many factors such as industry, volume, payment terms etc. that may influence the rates, but it is generally between 1% and 5% per thirty days

What amount or percentage of invoice will you advance? Advances are between 70% and 95% of the face value of eligible invoices and are established at the time an account is opened. Established advances will for the most part depend on risk factors such as industry, terms of sales and delivery, volume, lien priority, time outstanding, client relations, experience etc..

When, how, and how often are advances paid? The time and frequency of advances often depends on when and how frequently you submit invoices for funding, whether it is early or late, daily, weekly, bi-weekly or monthly. Advances can be paid in any number of ways; the typical way is by wire transfer. The other payment options are by ACH, teller deposit, check by mail, payment on location etc.

When will any balance amounts be released? All balances less applicable fees will be rebated to you after it is collected.

What is it? Reverse consolidation program is the perfect solution for business owners seeking relief from the financial strain of making daily payments on multiple cash advances.

How does a reverse consolidation work? A standard advance pays you upfront cash in exchange for a percentage of future earnings. Money is received by the business owner in a lump sum and payments to the bank are remitted through daily account drafts. A reverse consolidation works in a similar fashion, except the upfront cash is not paid in a lump sum. With a reverse consolidation, your monthly payment (spread over an extended term) is also drafted daily while cash is deposited into your account equal to the sum of your existing advance payments. The difference represents a savings (up to 45% in most cases), potentially freeing up thousands in weekly working capital.

What is it? Our network partners have developed a group of services to help smaller businesses succeed. They analyze each client's financial condition and offers appropriate solutions depending on their unique situation.
  • They have helped thousands of smaller companies. Here's why some business owners come to us for help:
  • They want to pay their creditors but can't afford what they're demanding.
  • They've already tried negotiating on their own.
  • They can't get financing.
  • Their cash flow is tight.
  • They can't work on their business and their debts at the same time.
  • They need payment terms stretched out over time.
  • They want to avoid business bankruptcy.

Business Debt Restructuring has many benefits:
Increase your cash flow:
Short-term debt can be converted into a manageable long-term plan.

Improve your quality of life:
Let us deal with creditors, collection agencies and attorneys so you can get back to doing what's important, creating revenue, not hiding.

Avoid unnecessary legal fees:
Debts can be settled without the need for attorneys.

Your payments are fixed & affordable:
Cash outlay can be forecast and managed better.

What is it? We have partnered with credit repair companies that have programs designed to fix, change, correct and delete information that is hurting the credit scores and indexes of your business. There are many credit scores and indexes associated with the business credit bureaus that can fluctuate for a variety of reasons.

Does ordering my credit hurt my credit scores? When a third party pulls a consumer credit it is called a “hard inquiry” and can reduce the scores. When shopping for mortgages, car loans, leases, as well as student loans inquiries (pulls) reduce the scores differently within certain periods of time called windows. When a consumer or any of our partners initially pulls their credit directly(for an MCA’s) the score does not decrease. A consumer can pull their own credit 80 times in a day and the score will not reduce. Consumer pulls are also called “soft inquiries”. It is hard to say exactly how much a hard inquiry can reduce scores since each credit profile may be assigned a different score card based on the risk category it falls under. For some consumers six hard inquiries in a one-year period could drop scores as much as 20-40 points while others may have a minimal decrease.

Why is the score I pulled online different from the score pulled by my Mortgage Bankers? There are many different scores available online and most of them do not make clear that they are not Fico Scores. These varied scores also have varied ranges. What this means is a 740 score with Vantage, Plus, or Credit Karma may be a totally different number when the banker pulls a Fico Score on the same person.

I heard that negative information cannot be removed from a credit report. Is this true? NO, this is not true. Negative credit can be removed prior to the 7 years or 10 year period it legally can be placed on the report for. There are laws that apply to credit and creditors, courts, collection agencies and credit bureaus that must be followed for the information to remain on their report. If they do not uphold their legal responsibility they are forced to remove this information from the report.

Does a collection account come off once I pay it? No, just because you pay a collection does not mean it will automatically be removed. The only legal responsibility the collection agency has is to update the credit report that the collection is paid. In most cases a paid collection will not increase your scores.