THE MERCHANT CASH ADVANCE APPLICATION PROCESS A … · Merchant Cash Advance provider pays a...
Transcript of THE MERCHANT CASH ADVANCE APPLICATION PROCESS A … · Merchant Cash Advance provider pays a...
TheMerchantCashAdvanceResourcewww.merchantcashadvanceresource.com2011
THEMERCHANTCASHADVANCEAPPLICATIONPROCESSAGUIDEFORBUSINESSOWNERS
(WHATTOKNOW,NOMATTERWHOYOUAPPLYTO)
By:TheMerchantCashAdvanceResourcewww.merchantcashadvanceresource.com
AsitededicatedtoindependentinsightandresourcesontheMerchantCashAdvanceIndustry
TheMerchantCashAdvanceResourcewww.merchantcashadvanceresource.com2011
1.COMPLETINGANAPPLICATIONTheMajorityofMerchantCashAdvanceprovidersrequirebothbusinessandpersonalinformationwhenapplying.Socialsecuritynumbersandsignaturesarerequiredtoauthorizeacreditpull.Howyourcreditaffectsyourapprovaldependsontheunderwritingcriteriaoftheindividualfirm.Allofthemaredifferent.
TheMerchantCashAdvanceResourcewww.merchantcashadvanceresource.com2011
2.SUBMITTINGMERCHANTPROCESSINGSTATEMENTSTheseareseparatefromyourbankstatements.Manybusinessownersassumethatsincetheirbankaccounthasarecordofalldepositsfromtheirmerchantprocessor,thatbankstatementsalonearesufficient.Thisisnotthecase.Whilebankstatementswillbeaskedfor,themerchantprocessingstatementsarenecessaryforinformationlikesalesvolumebycardtype,returnfrequency,chargebackhistory,processingfees,monthlycosts,batchfrequency,averagetransactionsize,andprocessorimposedreserves.
TheMerchantCashAdvanceResourcewww.merchantcashadvanceresource.com2011
TheMerchantCashAdvanceResourcewww.merchantcashadvanceresource.com2011
3.SUBMITTINGBUSINESSBANKSTATEMENTSThisshouldbeself‐explanatory.Allpagesofeachbankstatementwillberequired.Sendingthefirstpagesummarydoesnotsuffice.TheMerchantCashAdvanceprovidermayusethesetoanalyzedailycashflow,verifyactivityfromyourmerchantprocessingstatements,andreviewwhatfundsarebeingusedfor.
4.SUBMITTINGADDITIONALDOCUMENTSEveryMerchantCashAdvanceproviderisdifferent.Anyofthefollowingmayberequested:
• ArticlesofIncorporation• K‐1ofrecentbusinesstaxreturn(toverifyownershipbreakdown)• Businesspropertylease• Driver’slicenseorphotoIDofowner(s)• Voidedcheck(wherefundswillbedeposited)• Recentbusinesstaxreturn• FinancialStatements
5.VERBALREFERENCESUnderwritersmaycontactyourvendors,yourbusinesspropertylandlord,orthebankholdingthemortgageonthebusinessproperty.Theywilltrytodetermineifyouareingoodstandingandlikelihoodyouwillcontinuetooperateatthatlocationunhindered.
6.PHONEINTERVIEWAllMerchantCashAdvanceproviderswillspeakwithyouatsomepointduringtheprocesstoreviewbusinessinformation,discussyouruseoffunds,andgaugeyourunderstandingandwillingnesstofollowthroughwiththecontractterms.
TheMerchantCashAdvanceResourcewww.merchantcashadvanceresource.com2011
7.SITEINSPECTIONSomeMerchantCashAdvanceprovidershireanindependentinspectionfirmtovisityourlocation,verifytheaddress,examineinventory,andtakenoteofhowmanycreditcardmachinesareonsite.
8.ESTABLISHTHEMETHODOFREPAYMENTIftherecoveryoffuturereceivablesisstructuredtooccurviasplitfunding,youmaybeconvertedtoanewmerchantprocessingcompany.Thisisnotthecaseforallproviders.Youwillgenerallyneedtoprocesscardsfor2fullbusinessdaysinamannerthattheproviderisabletomonitorpriortofundingIftherecoveryoffuturereceivablesisstructuredtooccurviaaLockbox,thenthiswillbetheverylaststepintheprocess.Youwillgenerallyneed2fullbusinessdaysworthofmerchantsalestobedepositedintothisaccountpriortofunding.Iftherecoveryoffuturereceivablesisstructuredtooccurviadirectdebit,atestdebitmayoccurpriortofundingtoensuretheprocesswillwork.
9.COMPLETION/FUNDSTRANSMITTEDTOYOUOnceyoureceivefunds,theMerchantCashAdvanceproviderwillrecovertheirpurchasedreceivablesinaccordancewiththecontract.
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GLOSSARY
MerchantCashAdvance:Thisisapurchaseofabusiness'sfuturecredit/debitcardreceivablesatadiscountedprice.ItisverysimilartoAccountsReceivablefactoring,withtheexceptionthatthesereceivablesdonotyetexistatthetimeofsale.TheMerchantCashAdvanceproviderretrievestheirpurchasebywithholdingaspecifiedpercentageofeachcardsaletransacted.Businessownersshouldbeawarethatthereisnotablanketcostorretrievalpercentageforthisfinancialproduct.Therearemanyprovidersandallofthemarerequiredtoevaluateyourbusinessfromtheirownperspectiveandcreateapersonalizedoffer.Mostwillpresentyouwithseveraloptionswithdifferentstructurestochoosefrom.AdvanceAmount:TheamountadvancedtothebusinessownerisreallycalledthePurchasePrice.Itisthediscountedpricepaidtothebusinessinexchangefortheirfuturecredit/debitcardreceivables.RetrievalRate:Thisisthepercentagewithheldfromeachcredit/debitcardtransactionandforwardedtotheMerchantCashAdvanceprovider.Thisrateispredeterminedinthecontractandunderallnormalcircumstancescannotbechanged.Itisoftenreferredtoastheholdbackpercentageorwithholdrate.PaybackAmount:ThisisthecostoftheadvanceandshouldbereferredtoasthePurchasedAmount.TheMerchantCashAdvanceproviderpaysadiscountedprice(theAdvance)tothebusinessownerforaspecifiedpurchaseoffuturecredit/debitcardsales.SplitFunding:SplitFundingisamethodusedforaMerchantCashAdvanceprovidertorecovertheirpurchasedcredit/debitcardreceivables.Themerchantprocessorplaysakeyrolesincetheyaretheonesthatactually"split"thebusiness'sdepositsbetweenthebusinessandtheMerchantCashAdvanceprovider.ThepercentagesplitisdeterminedbytheRetrievalRate.TheMerchantCashAdvanceprovidermusthaveapre‐existingsplitpartnershipwiththemerchantprocessorforthistobepossible.Morethanlikelythebusinessownerwillneedtochangetheirmerchantprocessortoobtainthefunds.SomeproviderscanstructurealternativestotheSplitFundingmethod.LockboxFunding:Alockboxisabankaccountresponsibleforthecollectionofpayments.AnalternativetotheSplitFundingmethodisLockboxFunding.ThisinvolvestheMerchantCashAdvanceprovideropeningalockboxaccountforabusiness.Thebusinessmustinstructtheirmerchantprocessortodeposittheirsalesintothisaccountuntiltheadvanceobligationshavebeenfulfilled.Thebusiness’scredit/debitcardsaleswillbedepositedintothisaccountandthebankwillappropriatelysplitthefundsinaccordancewiththeRetrievalRate.Thebusinessandtheadvanceproviderreceivetheirsplitbybankwire.RestrictedIndustries:Noteverybusinessthatacceptscreditcardscanapplyforfunding.Thebusinessmodelalonemaybecausefordisqualification.RestrictedIndustrytypesarebynomeansuniformacrosstheindustry,nordoesbeinghighriskimplythatanapprovalisnotpossible.Businessownersshouldconsultwiththeirsalesrepresentativetodeterminetheiroptions.