Understanding Eligibility Criteria MCAs
Merchant Cash Advances (MCAs) present a dynamic avenue for businesses searching for quick and adaptable capital. However, gaining approval for an MCA involves meeting specific eligibility criteria. This blog will delve into the typical requirements businesses must fulfill to navigate the path toward MCA approval.
1. Time in Business:
A fundamental criterion for MCAs is the duration a business has been operational. While requirements vary, businesses are generally expected to have a minimum operating history, ensuring a baseline of stability and experience. The minimum time in business for BCA is six months.
2. Average Monthly Revenue:
MCA providers assess a business’s monthly revenue as a key indicator of financial health. While there’s no fixed amount universally applicable, a consistent and robust monthly revenue stream is crucial, demonstrating the ability to manage the advance and make timely repayments. At BCA our minimum monthly review is 10K.
3. Transaction Volume:
Some MCA providers may inquire about the overall transaction volume. The more credits an account receives the better the odds for repayment as there is constant cash flow coming in. This broader assessment provides a comprehensive view of the business’s financial health. At BCA we like to see more than six credits per month.
4. Purpose of Funding:
Providers often seek insight into the intended use of the funds. While MCAs are versatile, businesses may be asked to clarify how the capital will be utilized to enhance growth and overall success.
5. Future Revenue Projections:
To gauge repayment feasibility, businesses might be required to provide future revenue projections. This forward-looking approach helps align the advance amount and repayment terms with the business’s anticipated income. This is mostly required in industries that do not necessarily have a steady income stream such as construction and different types of contractors.
6. Industry Type:
Providers may have preferences for specific industries based on risk tolerance and experience. Understanding these industry-specific criteria can offer valuable insights into a provider’s preferences.
7. Financial Documentation:
Comprehensive documentation, including bank statements, tax returns, and financial records, is a standard part of the application process. These documents offer a detailed snapshot of the business’s financial standing. At BCA our minimum requirement is 3 months of bank statements. More information may be required in particular circumstances.
8. Outstanding Debts and Liens:
Assessment of existing financial obligations, including debts and liens, is a common practice. While not necessarily a disqualifying factor, it can influence the amount of capital offered and the overall risk assessment.
9. Legal and Regulatory Compliance:
Adherence to legal and regulatory requirements is paramount. Ensuring compliance with tax obligations, licenses, and other regulations enhances a business’s eligibility for an MCA.
10. Previous Transaction and Repayment History:
For businesses with a history of using MCAs, providers may consider past transaction and repayment experiences. Positive track records with other providers can enhance eligibility for subsequent advances.
Strategic Planning for MCA Success
Understanding and meeting the eligibility criteria for Merchant Cash Advances is crucial in securing swift and flexible access to capital. By strategically aligning business practices with these criteria, enterprises can position themselves favorably for MCA approval. As businesses explore the opportunities presented by MCAs, thorough preparation and a clear understanding of provider-specific requirements will be key to unlocking the financial support needed for growth and success.
If you would like to learn more about how to apply here at BCA Capital Partners, please go to the Steps section of our website. Remember, we are always just a phone call away!
