If you’ve been looking into securing financing for your small to medium-sized business, you may have come across an option known as a credit card processing loan, or a merchant cash advance (MCA). This loan alternative can be an excellent option for business owners who do not qualify for traditional business loans or those who are seeking fast funding with flexible repayment terms.
Stick with us as we explain the ins and outs of how credit card processing loans work, some of the primary benefits, and the minimum requirements to qualify. When you’re through, you’ll have the information you need to decide whether this may be a good solution for your business financing needs.
What are Credit Card Processing Loans?
A credit card processing loan is technically not a loan at all. Instead, it’s a financing option that allows you to receive an advance on your future credit card sales. These merchant cash advances are often used as an alternative to other types of short-term business loans.
When you’re approved for an MCA, you’ll receive a lump sum of cash up front, then repay it over time based on a percentage of your credit card sales. These unsecured financing options are typically repaid over a short period, ranging from a few months to a year. Each payment includes a portion of the outstanding principal along with an agreed-upon rate of interest and fees. If you choose to pay off your MCA before the end of the repayment term, you can typically do so without any prepayment penalties.
Credit Card Processing Loans vs. Short-Term Loans
Credit card processing loans can be a good option for businesses that do a high volume of credit card sales, like restaurants and retail stores. One of the primary differences between an MCA and a traditional bank loan is that an MCA does not have a fixed payment schedule. Since the payments are based on a percentage of your credit card sales, if business slows down, you won’t be stuck having to make a large payment that could put a strain on your business cash flow.
This financing option also offers flexible funding with no requirements regarding how you can use the funds. As such, you have the freedom to use an MCA to pay for your day-to-day operating expenses, purchase new equipment, meet tax obligations, or cover just about any other type of business expense.
The repayment process is also very easy. Typically, your lender will automatically collect your payments, either by debiting the funds from your bank account or receiving the payments directly from your credit card processor. This helps ensure you never have to worry about making a late payment or having to pay late fees.
Many lenders, including Zinch, allow you to quickly pre-qualify for a credit card processing loan by answering a few short questions. When you’re through, you’ll know right away whether you’re likely to be approved, and for how much.
If you decide to move forward, you’ll provide a minimal amount of documentation to complete your application. Once you’ve submitted everything, you’ll typically know within 24 hours whether you’ve been approved and you can often receive your funds within 48 hours. Many business owners find this fast funding to be a significant benefit, particularly when they are strapped for cash.
Qualifying for a Credit Card Processing Loan
The requirements to qualify for a credit card processing loan are often more lenient than they are for other types of business loans. While the lender will often review your credit score and other financial information, the volume and dollar amount of your credit card sales is the primary factor that influences the qualification decision.
For example, if you have been in business for at least six months and have had a minimum of $10,000 in credit card sales each month, you’re likely to qualify for a credit card processing loan from Zinch. This is true even if your credit score and other financial information are less than ideal.
Want to learn more about merchant cash advances and whether they might be a good choice for your business? Contact us today at (714) 500-6622 to learn more about your options. You could qualify for up to $250,000 in just 24 hours.
