As the saying goes, “It takes money to make money.” There are times when larger-than-usual expenses are required to fulfill your business strategy. Merchant cash advances (MCAs) could potentially be included in this category, as they cost more than many of the other loans available to small business owners. It’s not uncommon for the interest rates on merchant cash advances to start around 18–20%, with repayment terms lasting just a couple of years. With such a steep cost, this type of financing isn’t for everyone. But there are times when the benefits of a merchant cash advance clearly outweigh any drawbacks. After all, this uniquely structured loan allows you to tap into your future credit card transactions to acquire the funding you need. And it could be the ideal solution for any number of situations you might find yourself in. Why Merchant Cash Advances Are Special These loans are built for speed and efficiency, connecting you with up to $200,000 in as few as 24 hours. This short timeline makes merchant cash advances perfect for situations where long-term planning isn’t an available luxury. For example, you might have a key piece of equipment break down. This type of financing enables you to fix or replace it without a long delay. Or perhaps you have identified a lucrative business opportunity that requires rapid action. A merchant cash advance can put you in a position to strike while the iron’s hot. Merchant cash advances move as quickly as the world of small business often does. You’ll find that the application has fewer pages than a standard loan application, which makes it possible for lenders to process them faster. When everything goes according to plan, you can receive the funds you’ve requested within 24 hours of approval. The Details of Merchant Cash Advance Requirements While the approval for most small business loans depends on your financial history, a merchant cash advance is predicated more on your current and future financial transactions. Lenders will take their payments straight from your credit card merchant account, so if you’re bringing in enough money each month, they will likely feel confident enough to accept your application. If your monthly transactions are at or above $2,500, and there aren’t any liens on your business-owned property, lenders will view you as a potential candidate. Because your past is of lesser importance, merchant cash advances are an ideal option for small businesses that have faced rejection from other lenders, such as new businesses or those with less-than-stellar credit scores. Another benefit of not having lenders scrutinize your financial history is that you won’t have any inquiries show up on your credit report. While there’s nothing wrong with an inquiry occurring while you’re seeking a small business loan, it should be viewed as a win any time that you can avoid it happening. The streamlined application for a merchant cash advance means that you won’t need to supply as much documentation to potential lenders. Plan on gathering 4–6 months of bank statements, as well as other basic financial documentation. Depending on the lender, you may also need to submit your tax returns, AR (accounts receivable) summary, and profit and loss statements. This short list of documents contrasts sharply with loans from the Small Business Administration (SBA), where the infamously tedious application process requires you to provide all manner of paperwork. With this type of loan, you can also rest easier after your application is approved. The unique aspects of merchant cash advance requirements make it so you don’t carry as much personal liability. “One of the other benefits of an MCA is that a personal guarantee on the money is not always required,” explains Forbes. “The advance often can be strictly in the business's name. That means your personal credit as the business owner won't necessarily be attached to the advance and that you may not personally carry any liability. There are times when a personal guarantee or collateral, such as real estate, may be required, depending on the amount of the advance you're requesting. Typically, if you stay within 100% to 150% of your monthly revenue stream, a guarantee won't be required.” It’s worth noting that you can’t have merchant cash accounts from multiple lenders at the same time. This differs from loans and lines of credit, as you are usually permitted to have simultaneously from more than one lender. Just know that you’ll need to pay off any current merchant cash advance before you can acquire another one from a different lender. Given the higher interest rates associated with merchant cash advances, some entrepreneurs choose to leverage them as a bridge to a different type of loan with more favorable rates and terms. This approach allows you to quickly get an influx of money, then transition into a more sustainable loan without much impact from the steeper price tag on the merchant cash advance. Getting the Best Merchant Cash Advance for Your Needs Make sure you have a clear plan in place before submitting a single loan application. Identify how much money you need and when you’ll need it to reach your account. These details allow you to sift through various loan options to find one that matches your unique situation. Once you’ve narrowed your search to a few solid candidates, be sure to read through the fine print to confirm you feel comfortable with the loan terms. Some lenders try to hide unethical fees in their terms, so the best way to prevent surprises down the road is to carefully analyze the fine print in the early stages. When you find the ideal merchant cash advance, gather all the necessary paperwork and give yourself plenty of time to complete the application. It’s true that the process will be more streamlined than for other types of financing, but you still want the luxury of being methodical. By following each prompt and noticing even the smallest details, you’ll put yourself in a strong position for approval.