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It’s easier to meet the requirements to qualify for a merchant cash advance than the requirements for a business loan. You don’t need extensive documentation, a perfect credit score, and you also won’t need to create a business plan to qualify. However, each provider may have different requirements.
This article outlines the top 10 merchant cash advance requirements commonly asked for by most MCA providers in the United States, which will help you prepare for a smoother application process.
What Do You Need to Qualify for an MCA?
Below is a table highlighting the 10 most common requirements MCA providers ask for:
| Requirement | Description |
|---|---|
| 1. Minimum Monthly Credit Card Sales | Typically at least $8,000 |
| 2. Minimum Time in Business | Usually at least 6 months |
| 3. Active Bank Business Account | Business checking account |
| 4. Business Bank Account Statements | Usually the last 3 to 6 months |
| 5. Merchant Processor Statements | Usually the last 3 to 6 months |
| 6. Average Daily Bank Balances and Deposits | Regular deposits with minimal NSFs |
| 7. Minimum Credit Score | Typically a minimum of FICO 550 is required |
| 8. Business Not in a High-Risk Industry | High-risk examples: Cannabis or Crypto |
| 9. Valid Proposed Use of Funds | Must be used for business-related purposes |
| 10. Valid Form of Personal Identification | Such as a driver’s license or passport is required |
Now that you have a good overview of what you need, let’s break down each requirement in more detail to understand exactly what you need and why it’s necessary.
Requirement 1: Minimum Monthly Credit Card Sales – $8,000+
To qualify for an MCA, most providers require that your business have a minimum monthly credit card revenue of at least $8,000. This requirement ensures that your business generates consistent income through credit card sales, so there is enough revenue to deduct the daily repayments from.
Requirement 2: Minimum Time in Business – 6 Months+
Most MCA providers require your business must be in operation for at least six months. This minimum operational duration primarily serves to verify that you’re running a legitimate, active business, reducing the risk for MCA providers.
Requirement 3: Active Business Bank Account – 3 to 6 months
MCA providers require you to have an active business bank account, specifically a business checking or current account in the United States. This account is not just required as a formality; it is also used to facilitate the depositing and repayment deductions of the cash advance.
Requirement 4: Business Bank Account Statements – 3 to 6 months
Most MCA providers will require you to provide at least 3 to 6 months of business bank statements. These statements serve as supporting evidence, validating the financial information you’ve submitted in your application.
Requirement 5: Merchant Processor Statements – 3 to 6 months
If verifying your business’s average monthly credit card transactions is challenging through your bank statements, the MCA provider may request the last 3 to 6 months of merchant processor statements. These extra statements will help prove that your business has consistent credit sales to make regular MCA repayments.
Requirement 6: Daily Bank Balances and Deposits
Having positive end-of-day balances and a minimal number of Non-Sufficient Funds (NSFs) logged in your bank account can also be a requirement for some providers. Too many NSFs could indicate that your business is under too much daily financial stress to meet its capability to repay the required daily debt.
Requirement 7: Minimum Credit Score – FICO 550+
A FICO credit score of 550, although categorized as “poor,” is often the minimum score that many MCA providers will consider for eligibility. If you meet or exceed this score, you’re generally in a position to be considered for an advance. However, scores below 550 are usually seen as red flags, making it difficult to secure funding from an MCA provider.
Requirement 8: Business Not in a High-Risk Industry
If your business is in sectors like cannabis, adult entertainment, or online gambling, you may find it challenging to secure an MCA. MCA providers often have reservations about extending cash advances to businesses in these high-risk industries, primarily due to factors like market volatility and regulatory complexities.
Requirement 9: Valid Use of Funds
MCA providers are primarily interested in knowing what the funds will be used for within your business. They don’t make judgments on the specific purpose but want to ensure that the funds will be utilized for legitimate business needs, such as equipment purchases, inventory management, marketing campaigns, or expansion plans.
Requirement 10: Valid Form of Personal Identification
As the business owner applying for an MCA, you are required to provide a valid form of personal identification, such as a State Identification Card, driver’s license, or passport, as a minimum requirement. This helps comply with the law and safeguard against potential risks like fraud or identity theft.
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The Bottom Line
Remember, not all the requirements mentioned are a minimum requirement for every MCA provider. They represent a general list that is common to many providers. You’ll find that MCAs have easier-to-fulfill requirements than traditional lenders. Shorter operational histories and less-than-perfect credit scores are often acceptable because the focus is on your business’s monthly credit card sales. Plus, you can use the funds however you want within the business. However, if your business is in a high-risk industry, you may find it challenging to secure an MCA. Documentation is less stringent than with traditional loans, but it’s still required, so make sure you have it ready when you apply. A FICO score below 550 could make it more difficult for you to secure an MCA. Even though your business is securing the funds, you’ll still need to provide valid personal identification for legal and fraud prevention reasons. Knowing all the requirements upfront will make your application process much smoother. At MCashAdvance we have 5 simple requirements you must meet to pre-qualify for an MCA.