Can High-Risk Merchants Get a Merchant Cash Advance?

It is often tough for high-risk merchants to qualify for bank loans. A merchant might pose a greater likelihood of being unable to pay for the advance. A high-risk business can still qualify for a merchant cash advance to help cover many of the expenses and needs it holds.

You can get a merchant cash advance if you run a high-risk business. You can do this even if you’ve tried applying for a bank loan before but were rejected. You’ll also need to plan for an advance, as you don’t want to enter anything that might be potentially risky or something you’re unable to handle.

Why Might You Be a High-Risk Business?

There are many reasons why a lender might not approve your loan application:

  • Your business might be new and hasn’t proven itself to be credit-worthy.
  • The credit rating at your business may be too weak. It could be poor due to your business being unable to cover some of your expenses or other duties.
  • You might have declared bankruptcy not long ago.
  • Your business is in a high-risk industry where returns, cancellations, chargebacks, and other concerns are likely.
  • Some high-risk entities are in fields subject to extensive governmental regulation. Their legal standing may always be in question. These rules might change if a government wishes to impose restrictions. There’s a chance a business may become illegal in some places, but that depends on what a company might request.
  • You could also have qualified for a loan in the past, but the provider had to back out of the deal. The lender might have left due to a significant chargeback, thus listing your business as a terminated merchant entity.
  • You could have significant financial liabilities. Some lenders will not do business with companies that have debts worth $200,000 or more.

The worst part about these concerns is that it isn’t always your fault that you’re struggling for a reason. You might have run across difficult times in the local economy, or your business isn’t bringing in the inventory or workers it needs for operation. But these problems won’t be a problem if you’re looking for a merchant cash advance, as it may be easier to acquire.

Fewer Data Necessary

You will not require as many things in your merchant advance application as if you were applying for a loan. You will only need to supply a few things, including:

  • Credit card processing data
  • Details on your business plan, including what you want to do with your company
  • Reports on your inventory, employment efforts, and other factors

Some cash advance providers can offer a more favorable factor rate if you submit enough data. You could also get more money from your advance depending on the situation.

Easier Than a Loan

You’ll find a merchant cash advance to be more effective than a loan for many reasons:

  • You will not be subject to the high rates that a loan features. High-risk businesses often pay rates that are several times higher than what most other entities would spend.
  • The repayment terms for an advance are easier to manage. You’re paying a percentage of your daily credit card statements here. This point isn’t like a loan where a high-risk business would have limits over how long the loan can last.
  • The processing time for your advance will be short. You could get the money you need within a week after you apply for the service. You won’t risk waiting for months to get something only to get a rejection at the end.

Keep Your Business Running

You’ll especially appreciate how your high-risk business will stay operational after acquiring the funds in your advance. You could do many things for your company, including planning your inventory and employment needs, opening a new location, or renovating or expanding an existing entity. The advance will help you make your business more viable. You might see your risk level drop as your credit rating improves and you stay earning more money.

A Few Notes

While a merchant cash advance can be useful for your high-risk business needs, you must also watch how you’re going to manage your funds. There are some notes to see when looking at how well an advance can work for your use:

  • Look at the factor rate you will cover with your merchant cash advance before confirming a deal. The factor rate may be less than what you’d handle through a traditional loan, but it may still be more significant than what most others may spend.
  • Check on how well you bring in money before agreeing to your advance. You’ll spend a percentage of your daily credit card totals to repay your advance, so you don’t want to restrict your daily totals too much.
  • Any business that deals mostly with credit card payments would benefit from a merchant cash advance more than one that handles plenty of cash payments. Look at how your customers pay for products or services with you before agreeing to anything. An advance isn’t suitable for businesses that handle cash-based payments more often.
  • Review all the terms surrounding the advance, including rules on what will happen if you are unable to cover the cost of the advance. Each lender will have unique terms over what works and how you can get the funds you need soon.
  • Your provider may not support whatever payment processor you utilize. You might need to switch to a different processor if necessary, although most providers are willing to work alongside whatever you’re already managing at a time.

Be aware of what you’re getting from a merchant cash advance before moving forward with the deal. You’ll find it is easy for you to get more from an advance, but you should still be cautious with whatever you’re going after when coming across a suitable deal. Your business will do well with an advance if you plan your work right and notice what is open.

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