Merchant Cash Advance FAQs
Q. How long does it take my Cash Advance to get approved?
It takes about seven to ten days to approve a Merchant Cash advance. Most conventional Small business loans take up to six months.
Q. How good does my credit have to be?
Merchant cash advance program has Liberal Underwriting. If your credit is above 500, you could qualify for this funding program. Banks typically require 725 Credit Score for approval on most loans.
Q. What do I need for collateral?
No collateral is required for a Merchant Cash Advance. The funding is based on purchasing future credit card sales.
Q. What types of documentation do I need?
Compared to conventional business loans, our Merchant Cash Advance Program requires limited documentation. Most funding scenarios require the following:
- Merchant Application
- Six Month’s Credit Card Statements (most recent)
- Two Month’s Bank Statements (most recent)
- Funding Calculator
- Deal Description Sheet
- If applying for Funding over $75K or Over 90% of Avg Monthly Credit card Sales you will also need the following:
- 12 Month’s Credit Card Statements
- Four Month’s Bank Statements
- Most Recent Tax Return
Q. What is my business slows down unexpectedly and I cannot afford to pay the loan back?
Your payment fluctuates with business volume. For instance if you normally collect 10,000 in sales, and one month you only collect 5,000, you will pay a lower amount back.
Q. Is there a personal guarantee on funds?
No. There is no personal guarantee on funds.
Q. Does the Merchant Cash Advance affect my debt to income ratio?
No, it does not affect your debt to income ratio.
Q. How is Bluestar Business Services different than other Merchant Cash Advance Programs?
There are a couple of things that make us different. First, we deal with a lot of private money. This gives us access to approval guidelines that are not bound to institutional rules and requirements for underwriting. Second and more importantly, we are here for the long term. We have been in business for almost ten years and are an accredited business with the BBB. We don’t make false promises we may not be able to keep. We will advise you in an honest way, and try to give you as many options as possible, letting you decide what is right for your business. Anyone that is telling you they offer a guaranteed approval without knowing anything about you or your business is lying and that should be a red flag. So run.
Q. What options do I have to pay back my cash advance?
Merchants have three options for ways to payback the cash advance. Some merchants may not qualify for all three types, due to credit or other reasons.
Split Funding – Split funding is used when the capital source has an agreement with the merchant’s credit card processor to split the specified percentage from the merchant’s daily batch activity and fund it directly to the capital source. This form of payback will typically require a processor change.
ACH Debit – Merchants on this program will need to provide the login access the their online merchant services reporting. The capital source will then access the account daily to determine the amount of sales from the previous day. They will determine the amount due and generate an ACH debit from the merchant’s account. This method usually does not require a processor change.
Lockbox – This is the least desirable payback method for merchants, because they lose a day of cash flow on the proceeds from credit card processing. The merchant is required to open a new joint account with the capital source. Their daily credit card sales are deposited into the new account. The capital source will subtract the amount due to them and fund the remaining balance to the merchant’s operating account the following day.
Q. What are some other options of funding my business and their disadvantages?
- Venture Capital – Venture capital is typically provided to struggling businesses for an ownership stake, as well as partial control of a business.
- Angel Investing – Angel Investors often work with start ups and will usually want ownership and some control of a business. In many situations, the business owner will pay 100’s of times the cost of what was initially provided in capital.
- Account Receivable Factoring – Businesses will sell their future accounts receivables (sometimes at 50 cents on the dollar) to raise capital. In many cases, the funds are collected by the investor within 30-60 days.
- Traditional Bank Loans – A bank loan may show an interest rate of 10% over 10 years. If you are borrowing $20,000 to build a deck, you may feel like you are using that money for 10 years, but you are actually only using it for the amount of time it takes to build the deck. Maybe a month. The rest of the time you are just accruing interest charges. By the time 10 years have passed, you have spent more than twice as much for the money compared to a normal cash advance.
Q. What is your interest rate?
We do not work with an interest rate. This is not a loan product, and offers many advantages over working with a loan product. We are purchasing your future receivables now at a discount. The cost is determined by a factor, and once set it never changes. This is good for you because even if your payment term runs longer than expected, you do not incur any additional cost.
We have several different cost options depending on length of payback, ratio of funding to monthly processing amount, and the percentage of sales we are purchasing on a daily basis. I will be able to provide you several options so you can decide what is right for your business. We work with factors ranging from a 1.15 to 1.5.
Q. I am currently involved in an advance with another company. Is there any way I can get another Merchant Cash Advance?
We work with many companies that are in existing advances. We typically will buy out the existing balance, but from time to time have been able to accommodate a second concurrent advance if the numbers work.
Q. How are the rates you charge legal?
Please keep in mind this is not a loan product, so lending laws do not apply. The rates may seem high at first glance, but after considering the high risk of business lending and comparing our product to other business capital programs such as venture capital and angel investing, we are quite inexpensive.
Q. Is there a Fee for paying early or late?
The money factor we use to determine the cost of your capital is an all in cost. There are no penalties for early payment, and unlike a conventional loan, there is no additional cost if the payback term runs longer than anticipated.
Q. Do I have to change my credit card processor?
Many of our clients are not required to make a credit card processor change. The need to make a change is determined by the payback option you prefer and/or qualify for. However, we do offer very competitive rates for processing and in many situations have been able to save clients a lot of money.
