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Applying for a Merchant Cash Advance

Getting funding for a business is a challenge, whether it be ensuring your business meets strict requirements or simply have the time to fill out lengthy applications and go through vetting processes. However, business funding such as a merchant cash advance can have a huge positive impact on your business and planning efficiently for such an application can greatly reduce any time it would take away from your business, and reduce any potential hiccups in application.

Determine a Merchant Cash Advance value

As soon as you are applying for a merchant or business cash advance, or any type of funding or credit, the lender will always ask ‘how much do you want to borrow?’. Always know how much you need, where this money will go and how you would expect to see a positive business impact on the back of the lending.

Consider the amount of money you can afford – there’s no point applying for £5million in credit if you have no way of paying this back!

Calculate debt coverage within a business

A business plan on how a loan will be spent is one stage in the process of application, but a business owner with a merchant cash advance needs to also prove how the cost a debt will be covered.

With a merchant loan the cost of the debt is covered by a monthly percentage of credit and debit card sales.

The debt coverage service ratio is one way to approach this.

Work out your cash flow/loan repayment each month – this will give you your DCSR.

For example, if you are agreeing to pay around £1,000 a month initially, and make £10,000 a month in credit or debit card sales, you have a coverage of £10 for every £1 you need to spend. What’s more, merchant cash advances work on the notion that a percentage of income is paid back each month, so even in a slower month for the business the overall cost of the repayment is lower.

Analyse your current credit

A merchant cash advance is subject to a credit check, so ensure all credit is in order across the business. Any other loans you have need to be considered, notably the level of repayment, and length of time left to repay on these loans.

Also, highlight any previous loans which have been satisfied and ensure company accounts, submissions and cash flow are all noted. This will aid in speeding up the process needed for full cash advance application to take place.

Have a business plan

Above all else, ensure the value of a loan, the coverage of debt and any changes to borrowing, accounts or credit are accounted for within a business plan that has clear targets symbolising an increase in the level of business and success.

The business plan should include expected costs, expected income, variable market accounts and changes in overheads – such as office space or equipment.

365 Business Finance provide merchant cash advances to businesses across the UK. All loans are subject to credit checks and business plans to ensure the sustainability of your business upon the loan being accepted.

 

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