When your business is short on cash, having access to quick, flexible funding can make all the difference. A merchant cash advance can be an excellent alternative to business loans, but the amount you’re eligible to borrow and the repayment terms can vary widely from one provider to the next.
Rates, fees, and repayment requirements can all impact your overall borrowing cost and the ease and convenience of working with an MCA provider. Luckily, there are a few simple steps you can take to help you secure the best possible deal.
1. Maintain a Strong Daily Balance
When you apply for a merchant cash advance, one of the first things the provider checks is your business bank account. They want to see how money flows in and out and how much you’re able to retain in your account. Not only will your daily balance help determine whether your business is eligible for an MCA, but it’s also a strong indicator of its overall health and stability.
Since MCAs are based on your daily sales, having a steady stream of income can make you a more attractive borrower. Not only can this make providers feel more comfortable about extending a larger amount, but it could also lead to more favorable merchant cash advance rates.
If your business account frequently drops close to zero or goes negative, this could indicate potential cash flow issues. On the other hand, maintaining a higher balance may suggest that you’re managing your finances well and can handle the responsibility of an advance.
2. Shop Around for the Best MCA Rates
Don’t settle for the first merchant cash advance offer you find. Each provider may have different MCA rates, and some may offer better terms than others. By doing your research and comparing rates and terms from various providers, you give yourself a better chance of landing a deal that’s both affordable and suitable for your business needs.
As you compare options from various alternative lenders, make sure you understand the terms and read the agreement carefully. Remember that even small variations can lead to a substantial cost difference over time.
Also, keep in mind that while it’s good to shop around, too many credit checks in a short period might affect your credit score. Strategically space out your applications, and, if possible, inquire about rates without a hard credit pull. This can help you protect your credit score while you’re comparing merchant cash advance rates.
3. Prioritize Positive Credit Behavior
Your credit score is more than just a number, it’s a reflection of your payment behavior over time. Lenders look at it as a snapshot of how financially responsible you are, and keeping your score in good shape can work in your favor when applying for a merchant cash advance.
A record free of delinquencies speaks volumes about your ability to manage your finances effectively. No late payments or defaults mean you’re less of a risk for the lender, which could lead to more favorable MCA rates.
Make it a practice to periodically check your credit report for any inaccuracies or signs of fraud and to pay all of your bills on time. Consistent, timely repayments to other creditors can substantially improve your credit profile over time, giving you more bargaining power when it comes to negotiating rates.
4. Use Your Merchant Cash Account Wisely
MCAs typically come with two repayment options, Automated Clearing House (ACH) deductions or MCA splits through your credit card processing provider. Understanding these methods and using them effectively can make a significant difference in the overall cost of your cash advance.
ACH deductions work by automatically withdrawing a set amount from your business bank account. It’s straightforward and easy to manage, but you’ll need to make sure there’s enough money in the account to cover the deduction.
MCA splits happen right at the point of sale. A percentage of your daily credit card sales is automatically directed to repay the advance. This can be beneficial because it scales with your business volume–on slow days, you pay back less, and on busy days, you pay back more.
When choosing which MCA provider to use, check to make sure you’re comfortable with the repayment requirements. Selecting the right option can help you better manage your cash flow, ensuring you’re able to make payments on time. This can help you avoid fees and can set you up for even better MCA terms in the future.
5. Strategically Navigate the Process
Providing comprehensive and accurate financial statements can give lenders a clearer picture of your business health. When lenders see a strong financial foundation, they’re often willing to offer more favorable rates and terms.
You may also be able to save money by paying off your MCA early. Providers often offer early-pay discounts to reward borrowers who can pay back their balances promptly. Taking advantage of such discounts can notably reduce the overall cost of your MCA, saving your business money in the long run.
If you currently have a high-cost MCA, you may also be able to refinance it. When doing so, it’s crucial to obtain a payoff letter that details the remaining balance of your current advance. This can help both you and the new lender determine the exact amount that needs to be addressed, removing any guesswork.
Secure the Best MCA for Your Business
Merchant cash advances can be a lifeline for businesses that need fast, flexible financing. However, not all MCAs are created equally. When seeking MCA funding, it’s critical to do your research, carefully compare your options, and take steps to present your business in the best possible light. Doing so can help you secure better rates and terms, potentially making a significant difference in your business’s long-term success.
Contact us at (714) 500-6622 to learn more about your options. You could qualify for up to $250,000 in just 24 hours.
