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Contract Financing: How You Can Use It to Finance Your Business


What is contract financing?

As anyone in a business such as construction knows, getting a big contract can be a big step forward for your business.

Then you realize you need to pay for it. 

If you’ve ever found yourself in that or a similar situation, where you’ve got a big job to pay for but you won’t get paid until you reach the first milestone, or worse once the entire job is completed, then contract financing was designed for you.

Contract financing uses open contracts you have as collateral to approve you for funding. Those contracts also then determine the amount of funding you’re approved for. 

It’s similar to invoice factoring in that the advance is based on your customer’s creditworthiness, not yours. 

That’s because your lender is going to have to collect the amount from your customer, so they want to make sure they can be counted on to pay the contract. 

How contract financing works

We’ve covered the 30,000-foot view, but how exactly does contract financing work?

First, if you snag that big job and the customer wants confirmation that you can fund it (to ensure there are no delays), but you don’t have the cash, you can go straight to a lender and receive a letter of intent to fund which you can show them. 

Once you’ve signed up and been approved for contract financing with a lender, you receive a lump sum based on the size of the contract, often somewhere around 90% of the invoice itself, with the remaining 10% (minus fees) being released once the invoice is paid. 

Often, with such large jobs being split into milestones, these payouts happen for each milestone invoice.

For example, let’s say you sign a contract for a $200,000 construction deal with 4 milestones, each $50,000. 

Each $50,000 invoice would be sent to the financing company. First, they’d pay out 90% of that invoice, $45,000, immediately. Then, assuming the invoice is Net 30, once the finance company receives the invoice amount 30 days later, they send you the remaining 10% minus fees. 

This would then go on for each of the other 3 invoices until the job is complete. 

Now, let’s talk a bit about how fees work with contract financing.

Contract financing fees and rates

Factor fees, the fee typically associated with contract financing, typically range between 1.5 – 2.5%.

Using our example, if each invoice is $50,000 and your factor fee is 2%, you’d pay $1,000 in fees. So, for the total $200,000 job you’d pay $4,000 in factor fees.

Also, keep in mind that an additional fee might be charged in the event that your client doesn’t pay on time.


What businesses use contract financing?

If contract financing sounds like a useful funding method, but you’re not sure if it’s a fit for your business, use these points to help you decide.

Contract financing is a good fit for your business if:

  • You have poor credit and likely wouldn’t be approved for a traditional bank loan
  • Your customer does have good credit
  • You have a signed open contract with a clear schedule of milestones mapped out
  • Your business has a good financial track record and history showing you can get the job done in the allotted time. 

What kind of businesses does this make contract financing a good fit for? In particular, real estate development and other construction businesses are a good fit. Also, security, hardware/servers, and other various installation-oriented businesses are a good fit as well. 

How is contract financing different than invoice factoring?

If you’ve heard about invoice financing (also known as invoice factoring) before you might be wondering what the difference is between the two.

They have their similarities. However, where they differ primarily is this: 

  • Invoice factoring: Uses open invoices / your accounts receivable.
  • Contract financing: Uses open contracts for work that has not yet been completed. 

In general, a financing company that offers contract funding is far harder to find than invoice factoring. 

That’s because if the business does not fulfill its contract, the lender is not going to get paid, making this a risky investment for the financing company.

What do lenders look for when qualifying you for contract financing?

If contract financing sounds like it might be a good fit for you, you might be thinking about what the qualification requirements are.

Typically, lenders look at these elements to determine whether to approve your business for financing a contract: 

  • Your customer’s credit: They’re the ones paying the invoice, so they need to know that your customer is reliable. 
  • Your company: Do you have the resources necessary to complete the project and within the estimated block of time? The financing company will have their experts review your business’s profile to make sure. 
  • How long you’ve been in business
  • Financial documents: The financing company might consider your customer’s credit a primary qualifying factor, but that doesn’t mean they won’t also look at your financial health.

Keep in mind that these are all basic factors. Your financing company may consider other factors in their qualification methods. 

The best thing you can do to prepare is to review your own financial documents and make sure you’ve cleaned things up as much as possible.

Double-check the contract and make sure you estimated the time to completion correctly and that you have everything you need to complete the job.

Where do you get contract financing?

As contract financing isn’t technically a loan, it isn’t offered by banks. 

Instead, alternative lenders may offer contract financing (though not all do, for the reason we talked about earlier).

Before you apply for contract financing, make sure that it’s the right fit for you. 

Many alternative lending options now exist for businesses of all sizes and needs, from short-term lump sums of cash to business lines of credit you can tap into any time you need capital to pay for a contract. 

Get the funds your business needs– fast– with Excel Capital

We know how difficult obtaining a bank loan can be.

If you have bad credit, not enough credit, or a blemish on your credit report that could keep you from being approved for a loan, let us take a look and assess your business financial health.

Our system offers a more complete view of your business and allows us to approve you based on more than your credit alone (often even with bad credit).

Click here to apply and find out what your options are: Apply Now

5 Ways to Automate Your Business to Save You Time and Money

5 Ways to Automate Your Business

As you begin to scale your business, the sheer number of things that need to get done can seem overwhelming.

And while you don’t have to do everything yourself, even with a great team behind you, it can still become too much for you to handle.

That’s where smart automation comes in.

By automating your business in certain ways, you can take either repetitive or once difficult tasks or responsibilities and simplify everything so that it’s far easier to manage, often reducing the amount of work they take to complete on a consistent basis. Not to mention helping you combat competition. 

Is automation all about technology?

Keep in mind that automation doesn’t only have to do with tech-related improvements you can make.

In the list, below, we will mention some amazing additions or adjustments you can make related to modern tech that can be used as a tool for helping automate parts of your business.

However, there’s also a lot you can do that simply has to do with how you manage your team and work on a day-to-day basis.

Here are 5 ways to automate your business and get more done in less time and with less hassle. 

5 Ways to automate your business that will save you time and money

1. Streamline task management 

One of the easiest things you can do right off the bat is to streamline your task management and other similar systems such as communication.

Software like Slack can help centralize communication, reducing regurgitation so that everyone can get key messages from the same place (preferably, a second or third time after hearing about it in the meeting). 

Ways to automate your business

And software like Asana can help organize your task management, doing things like: 

  • Creating a visual board to track the progress of tasks
  • Managing a calendar to chart the schedule of content, product updates, and anything else, and
  • Giving employees a centralized place to manage their current tasks via their inbox. 
Ways to automate your business

Plus, in a surprise twist (well, maybe not so much considering modern software), Slack and Asana integrate with one another, allowing the two to works seamlessly. 

In addition to this, you can organize appointments with something like Doodle, almost fully automating the process of scheduling out meetings throughout your week. 

Ways to automate your business

And if you set up Google Calendar integration, those appointments get dropped straight into your calendar where you can view everything in one place. 

The amount of time and hassle you can cut down on just by using these few tools is immense, especially if you find yourself in several meetings a day or have a newly budding team that’s still communicating primarily through email or strictly verbally. 

2. Set clear policies and systems for your internal team– then outsource for expertise

When it comes to automation, systems are your friend. 

You don’t want to bog your team down with protocol, but by setting up clear policies and systems for your internal team to operate under, you take out a lot of the guesswork from their day-to-day work. 

Why is this so big? It not only saves you time by reducing the number of occasions where an employee has to get your attention to ask you how to handle a situation, it keeps them from losing their own flow throughout the day by you not being a bottleneck. 

The make these procedures ideal for your team, remain open to their input throughout the journey of establishing and testing these different systems out. Hear what they have to say and make adjustments to help them and you work better as a whole. 

Next, once you’ve done that, save time and maximize your results by outsourcing for expertise to freelancers and agencies on sites like Upwork

Your team is ideal for everyday work. However, when you need to run a big marketing campaign or something similar, it can be better to hire an outside expert as they’re likely better in their specific field than anyone on the team (of which employees tend to be more generalists) and are motivated to do a good job compared to a regular employee. 

3. Use AI and machine learning systems

Still somewhat vague and confusing terms, AI and machine learning, as they pertain to business, are quickly becoming invaluable for a number of reasons. 

In fact, you may already be utilizing some form of machine learning or AI without even realizing it. 

One major example is Google Cloud or Microsoft Azure, both being machine learning and automation platforms which are being updated regularly with new tools that give you the ability to do things like: 

  • Turn data into the optimal ad spend campaign
  • Or to optimize pricing based on customer behavior
Ways to automate your business

With AI and machine learning, you can take data your business already has and use it to maximize what you’re already doing, maximizing results and making everything more efficient. 

4. Document everything

You know how they always say we shouldn’t forget our history, lest we repeat the same mistakes? The same can be said for your business.

By documenting everything, including what you did for a particular project or campaign, how much you spent and how, timeframes, results, and anything else important, you have something you can look back on to inform future decisions.

What does this have to do with automation? 

Decision-making is a critical part of any business, and it only becomes more important the larger the business becomes. 

Documenting everything in this way means you spend less time in decision-making later when the time comes to pull the trigger on a new project because you can use your historical data to inform the new decisions related to that project, essentially semi-automating your decision making. 

5. Create a lead generation system

The various collective tools of digital marketing, from ESPs like Mailchimp and ConvertKit to Facebook Ads,  have given businesses the ability to create a lead generation system like nothing that has ever been seen before. 

Where before businesses had to run advertising campaigns in newspapers, or billboards, and T.V. commercials that hopefully led to new leads, now it’s very different.

Now, you can create a campaign that is almost fully automated, from the sharing of new content to the running of ads, collecting emails, and email marketing.

Huge sections of modern marketing can be semi-automated, freeing you up for more specific marketing efforts as well as to optimize those campaigns over time (something that machine learning can help automate as well).

Look for ways to automate your business– the right way

Automation can never be 100%. After all, we’re not quite ready for robots to take over. 

However, many of the processes within your business can be automated, saving you huge chunks of time and money, including:

  • Decision making
  • Marketing campaign optimization
  • Marketing campaign execution
  • Communication
  • Task management
  • And even just daily internal goings-on

So, use these tips to help bring the power of automation to your business and watch how it helps you free up more time and energy for other things that deserve your attention, allowing your business to grow that much faster.

High-Risk Business Loans: Are They For You?


What is a high-risk business loan?

High risk business loans are small business loans offered to business owners with bad or inadequate (not enough) credit or considered to be operating in a high risk industry. 

Approval for traditional loans is based mostly on credit– often in the 720+ range– which in the past meant that if you didn’t have good credit, you were out of luck. 

With high-risk business loans, though, you can be approved for a loan on bad credit, often at a higher interest rate. Hence, the term ‘high-risk’ refers to the risk the lender takes on when approving a high-risk loan, not the borrower. 


What do lenders consider high risk?

So, what exactly is high risk?

We’ve touched on credit so far, but exactly what credit score is considered high risk? And what other factors make you high risk?

Factor 1: Credit score below 600

If your credit score is around 600 or lower, you’re considered high risk. Keep in mind that this includes several other credit factors as well, including:

  • Too little credit history
  • Marks on your credit report, including judgments, liens, and bankruptcy

Factor 2: In business less than 2 years

Virtually all banks require you to have been in business for at least 2 years to approve you for any kind of business loan. 

In fact, most require you to have been in business for 5 years

This is the simplest and most straightforward factor and it comes down to one thing: the lender wants to see that you’re an established business that will be here tomorrow, so to speak. 

Factor 3: You’re in a high-risk industry

Certain industries are considered more high risk compared to others. This could be because of regular volatility, seasonality, they way they’re paid, or because they’re taboo.

High-risk industries include:

Keep in mind that this is a short list, there are many more industries that your lender may consider high-risk. 

If you have one or more of these factors, the best thing you can do is to review your business reports, such as profit and loss, as well as your credit report and try to clean things up as much as possible. 

Factor 4: You’re not showing profit

A final but equally important factor is showing profit or loss. If your business doesn’t show profit, or is operating at a net loss, lenders will be very wary of working with you.

The basic idea is this: if you’re not showing profit, how will you have the extra cash to pay off your loan? Lenders want to see a consistent history of net profit to ensure they’ll be able to recoup their investment. 

How can lenders approve high-risk businesses? 

A common question asked by business owners looking for and applying for a high-risk loan is: how can I be approved in the first place if my business is considered to the lender?

Lenders are in the business of lending money, but if they don’t get that money back, they’re out of business. So, why would they approve you if you’re considered high-risk? What’s the catch?

In the past, banks approved businesses based almost entirely on credit. If you didn’t have amazing credit, you were out of luck.

In some cases, loans have been offered at lower amounts and with higher interest rates in exchange for lower credit requirements. This is where the term “high-risk loan” originated. 

Yet, the restrictions placed on these loans have often been unfavorable for business owners in need of substantial capital to grow their business.

However, now there are many alternative lenders who will approve you for a loan that is comparable to a traditional bank loan in terms of approval amounts. 

And it comes down to the fact that they take more than credit into consideration when factoring their approval.

What other factors are those? Your business’s overall financial health, including:

By taking all of these factors into consideration, alternative lenders are able to qualify you more effectively than simply taking your credit score and report into consideration. 

What about collateral? How do alternative lenders secure loans?

Most alternative high risk business loans don’t require the typical “hard” collateral you’re used to, such as property, vehicles, or cash. 

Instead, they secure the loan with your business revenue, in some cases purchasing a portion of your future business sales as a form of soft collateral.

This is beneficial because if, in the unfortunate case, you’re forced to close down your business, you won’t be on the hook to pay that amount back. 

So, there’s no risk of losing your personal property or cash savings if your business goes under. 

High-risk and alternative business loans options

If a traditional bank loan is out of your grasp, there are a few options you have in terms of obtaining financing.

Over the past decade, many alternative options have arisen to fill the hole left by banks with increasingly more rigged qualification requirements (even though the average credit score has gone down). 

Here are a few of your options:

Peer-to-peer lending

Lending through peers is about as old as money, but modern peer-to-peer lending takes that to another level. 

With P2P lending, you can apply for funding on a platform such as Prosper or Upstart and get a sum of capital which is comprised of a collection of smaller investors who believe your business is worth investing in.

Credit union

Credit unions have long been good alternatives to traditional bank loans because they tend to offer competitive rates and member discounts.

The only negative is you’ll need a local credit union and you’ll likely have to become a member of that credit union to apply for a loan.

Alternative lending

Alternative lending comprises many different options such as business lines of credit and unsecured business loans.

Alternative lenders such as Excel Capital offer these options to business owners who aren’t in a position to be approved for a traditional bank loan due to bad credit or no collateral and need an alternative to get the capital they need to grow their business.


Get the funds your business needs– fast– with Excel Capital

We know how difficult obtaining a bank loan can be.

If you have bad credit, not enough credit, or a blemish on your credit report that could keep you from being approved for a loan, let us take a look and assess your business financial health.

Our system offers a more complete view of your business and allows us to approve you based on more than your credit alone (often even with bad credit).

Click here to apply and find out what your options are: Apply Now

How to Get Started with Google My Business: A Guide for Small Business Owners


What is Google My Business?

Google My Business is Google’s official tool that allows you to add your business to local Google search and Google maps listings.

Chances are, you’ve run across one such listing searching for something you’ve needed before.

Like this:


Through Google My Business, you can update your business hours, add your menu, photos and video of your location and products, and post status updates that offer useful information to those looking up your business on Google.

Below, we’re going to show you everything you need to know about setting up your Google My Business listing.

Table of Contents

  1. What does Google My Business cost?
  2. Create a Google My Business account
  3. Verify your business
  4. Update your GMB listing
  5. Frequently asked questions

What does Google My Business cost?

First, let’s get an important and extremely common question out of the way: 

“GMB sounds great, but how much does it cost?” 

Good news: Google My Business is 100% free for business owners to create and update their business information to show in both Google search listings and maps. 

With that out of the way, let’s talk about how to create a GMB account. 

Create a Google My Business account

Creating a GMB account is pretty easy and straightforward. 

First, log into the Google account you’d like your business connected to. Then, head to the GMB home page at Google.com/business and click the “Manage now button:


Next, either enter your business name in the search box to pull up your listing if it already exists or click ‘Add you business to Google’:


(Google may have automatically created your listing if your business has been around for a while, in which case you’d use the search bar.)

If you clicked “Add your business to Google”, you’ll be prompted to enter your business name:


Then, choose which category your business best fits into. It’s important that this is accurate because it will affect what kinds of listings your business shows up in:


If you’d like to add a location/address your customers can visit, click “Yes”. If you’re a private business that doesn’t allow walk-ins, click “No”:


Next, enter your business address if you chose to enter a location:


Then, if your business offers some kind of service outside of its actual physical location (such as food deliveries), notate it:


Lastly, for your business information, enter your phone number and website URL:


Finally, click “Finish” to complete your listing:


Verify your business

The final step is to verify your business in some way. 

There are several ways to do this, but the most common is by having a postcard sent to your business that has a unique code which you’ll then enter into your GMB account:


Other verification options that are available in select locations and for select businesses include:


  • By phone
  • By email
  • Instant verification
  • And bulk verification (for businesses with 10+ locations)

To learn more, check out Google’s official information page on verifying your business with Google My Business here

If you don’t want or can’t verify your business right now, clicking the tiny dropdown arrow at the bottom right within “More options” will expand a “Skip” button you can press to skip verification for now. 

How to verify by mail

If you’re using the most common method for verifying your Google My Business listing, use these steps:

  1. Enter your contact name
  2. Click the “Mail” button on the “Choose a way to verify” screen
  3. Check the mail for your postcard (Should arrive within 14 days, according to Google documentation)

Once you receive your postcard, follow these steps to enter the verification code:

  1. Log back into GMB
  2. Click “Verify location” from the GMB menu
  3. In the field, enter the 5-digit code you received
  4. Click “Submit”

If for whatever reason you believe you did not receive your postcard, you can request another by clicking here

Update your GMB listing

Now that your listing is complete, it’s time to make it look amazing. 

Once you’re logged into your Google My Business dashboard, click “Info” on the main menu:


From this screen, you can click the edit button to update all the information that shows up on your listing:


Once you’re done, your listing should look something like this:


Here are a few common areas you should update first:

  • Basic business information: Such as online ordering platform, reservations options, and phone number
  • Photos: Listings with photos get more clicks and requests, so make sure to upload as many photos you have of both the location, the food, and the menu. This includes your cover, which is the most important photo of your business as it shows here in your search listing:

Keep in mind that anyone can click “Suggest an edit” on your listing, so you’ll need to check back periodically to make sure your information is correct.

Google photo guidelines

Google has very specific suggestions in terms of what photos you should include of your business in your profile.

Here’s a quick summary:

  • Exterior: Pictures of the outside of your business during different times. 
  • Interior: Pictures of the interior of your business from different angles and at different times. 
  • Product / Food and drink: Show off all your products! If you’re a restaurant, make sure you photograph your most popular menu items. 
  • Employees: You should include shots of your employees at work, a shot of your staff/management, and any other image that displays your unique work culture. 
  • Common areas / Rooms: Pictures of where your customers will visit within your business.

*Note: for every one of the above categories with the exception of products (1 image / product), Google recommends you include 3 images. 

Get your small business seen with Google My Business

Google My Business is easy to set up and offers huge potential returns, with your business instantly showing up in local searches by customers who are looking for exactly what you’re offering.

There’s some optimization to be done, and you need to check your listing regularly to make sure your information is correct. 

However, to say it’s worth it would be an understatement. If you have a local business, you need to have (and optimize) a Google My Business listing. 

Frequently asked questions

What is the difference between Google My Business and Google Places?

Google Places was used for the same purpose as Google My Business up until 2014, when it was officially retired and later replaced by Google My Business. 

Google My Business is the only tool you need if you’re trying to get your business to show up in Google search and maps listings. 

How do I access my Google My Business account?

The easiest way to access your GMB account once it’s created is through the Google My Business app.

Download the Google My Business app here: iOS and Android

Why download the app? Aside from easy access to your GMB account, the app gives you the ability to: 

– Post status updates
– Access search metrics, and
– Update your business’s contact information and business hours among other details 

You can’t do everything through the GMB app, but it’s a useful tool that will suffice in most cases.

Merchant Cash Advance: The 2020 Guide


What is a merchant cash advance?

As opposed to a traditional loan where a lender provides funds in exchange for an interest-based repayment plan, a merchant cash advance (or MCA), sometimes called split funding, is a purchase of future credit and/or debit card sales in exchange for a fee.

In addition to this, a MCA is generally much faster than a traditional loan, with the ability to be approved and have your account funded in as little as 24 hours in some cases.

And you can use split funding for virtually anything, including:

  • Inventory purchases
  • Equipment upgrades
  • Hiring and training
  • Payroll
  • Taxes

For those who need capital fast, who don’t have great credit, or don’t have any applicable collateral that could be placed down to secure a traditional loan, an MCA may be the perfect funding solution.

As small business financing alternatives go, split funding is one of the most convenient when it comes to repayment.


How a merchant cash advance works

An MCA is an advance on future credit card sales. Therefore, it’s best for businesses who function mostly off credit and debit card sales.

What is convenient about split funding is the advance is repaid, typically via an ACH or automatic withdrawal, based on a percentage of those daily sales. The amount which is automatically paid towards the loan is typically called the “holdback” amount.

That means if you have a dip in regular sales, the amount taken out for those days will also be reduced, making it easier to pay back the advance when business is down.

The most unique aspect of an MCA is that it doesn’t use a typical APR interest fee but rather what is typically called a factor rate.

Click here to apply for a merchant cash advance and find out what your options are: Apply Now

What is a factor rate?

The factor rate, which takes the place of interest as the primary fee associated with MCA’s, typically ranges from anywhere between 1.14 and 1.48.

By multiplying your loan amount by the factor rate, you’ll have a rough estimate of the total amount you’re expected to pay once you’re done repaying your MCA.

For example, if you get an advance of $25,000, and your factor rate is 1.3, you’ll pay $32,500 before paying off the advance.

The factor rate associated with split funding is generally considered to be steep compared to the interest on something such as an unsecured business loan.

However, it trades increased fees (in some but not all cases, and depending on the lender) for hyper-convenience, speed, and reduced credit requirements.

Example of a Merchant Cash Advance

Let’s take a closer look at how an MCA works with an example:


Jerrett, the owner of a local cafe, needs $20,000 for the purchase of new high-grade barista equipment and a few additional hires to meet a recent increase to traffic at his location.

Jerrett doesn’t have much business credit history, only having been in business at his location for about a year. So, he can’t depend on a bank loan to get him out of his pinch.

Instead, he decides to apply for a merchant cash advance. Because he has the necessary credit card sales, so he’s approved for the $20,000 advance and is off to the races. He gets all the equipment he needs and gets some help around the cafe. Business is booming.

Now that the advance has been issued, he can begin paying it back with a percentage of his regular credit card sales.

If his factor rate is 1.25, on $20,000 he’ll be paying back a total of $25,000. The repayment period on an MCA is typically between 3 and 12 months, all depending on how high your regular credit card sales are.

However, because the repayment period is based on the volume of credit card sales, it doesn’t affect how much you pay. Instead, your regular holdback amount is based on a set percentage decided by the lender.

Let’s say your holdback percentage is 10%. If you average $20,000 in monthly credit card sales, you’d pay about $65 a day ($2,000 total over a month) on average based on that day’s sales towards the advance and have it paid back in full within about 10 months.

The exact method which is used to repay an MCA varies, so in the next section, we’ll quickly cover each of them.

Ways to set up a merchant cash advance

There are 3 ways that repayment on a merchant cash advance can be set up. Here’s a rundown on the 3 methods:

1. Direct split

With this method, the lender uses one of several trusted credit card processors to place a “split” on your credit card sales (hence why it’s sometimes referred to as split funding), directing the percentage notated in your agreement from your credit card sales.

Each time you batch out, that percentage is automatically removed behind the scenes and you receive your deposit in exactly the same way as you usually would with zero delays.

2. Lockbox

If you’d prefer to not change your payment processor, or your merchant processor has early termination fees you’d prefer to avoid, this may be a more preferable method.

With lockbox funding, instead of switching merchant accounts a lockbox account, also known as a bridge account, is set up to split your credit and debit batches.

A lockbox account is a typical bank account which you’re given credentials to, however, with your lockbox account, each time a batch is settled the account automatically “splits” the amount by sending the designated repayment percentage via ACH to the corresponding account and deposits the rest of your amount into the account for your use.

The only drawback with this method vs. a direct split through a credit card processor is that there is typically a 24-48-hour delay in the typical amount of time it takes for you to receive your deposit after batching.

To set up a lockbox account, you’ll be asked to sign the lockbox form given by your MCA provider. Once your bank letter arrives in the mail for the lockbox account, the only thing left to do is call your card provider to have your deposits redirected to the lockbox account (which typically takes up to 48 hours).

3. Variable ACH

The final way to set up an MCA is as a variable ACH.

This is ideal when your merchant processor isn’t already one of the provider’s friendly accounts (i.e. a direct split won’t work) and you as the business owner don’t want to deal with the 24-48-hour delay between when your batches are settled and when the MCA holdback percentage is removed (as in a lockbox account).

A variable ACH requires your MCA provider’s collections department to have access to your merchant processor’s login portal. Your provider will log in to your processor’s portal each to check your batch amount and then issue an ACH transfer for the holdback amount.

This method of repayment requires that your provider always has access to your merchant processor portal, otherwise the account is considered to be in default.

It’s generally harder to be approved for a variable ACH as, unlike when using split funding or a lockbox account, variable ACH approval is dependent largely upon your average ledger balance.

In other words, while you can be approved for both split funding and the lockbox method with a high number of non-sufficient funds (NSF’s) or overdrafts, with a variable ACH your average balance must be high to ensure that the full holdback amount can be collected regularly.

Click here to apply for a merchant cash advance and find out what your options are: Apply Now

Pros and cons of business merchant cash advances

Here are the primary benefits, and drawbacks, of a split funding:

As a merchant cash advance is a unique small business financing solution, it has a unique collection of pros and cons which are important to review before deciding if it’s the ideal solution for your needs.


  • Get funds fast: An MCA is a good idea if you need cash fast as you can have the funds within your account within 1-2 business days. As opposed to a traditional loan, this makes an MCA lightning fast.
  • No collateral: They don’t require traditional collateral, instead using your future credit card sales as a kind of “soft” collateral. That means you don’t have to risk losing something valuable such as your property or important equipment in the case of defaulting on the loan.
  • Good credit not required: Depending on the lender, fair or even bad credit is acceptable for an MCA. This makes it an invaluable funding solution for business owners who don’t have the credit to be approved for any kind of business loan.
  • Repayment terms fluctuate with business: If business is down, your payment goes down with it. This makes split funding one of the most flexible and convenient small business funding solutions available.

Con: The factor rate can be high

An MCA offers several significant benefits. However, every funding solution has both pros and cons, and a merchant cash advance is no exception.

However, while many funding solutions have several different drawbacks, an MCA really only has one, though it can be a big one.

The factor rate on split funding can be very high, as low as an equivalent 15% interest in some cases, but as high as triple digits in others depending on various factors.

For that reason, it’s important to know what the terms are of your advance going in, how much you’re paying and are able to pay, and whether it’s worth it for you.

It may be the perfect vehicle to get you out of a tough spot, help you buy new equipment that can drive sales, or help you hire the seasonal assistance you need to make full use of a busy season. Whatever the case, weigh the cost and benefits to decide if an MCA or another funding vehicle is the ideal fit for you.

Who is a merchant cash advance best for?

Still wondering if a merchant cash advance is the right funding solution for you and your business.

Consider these factors when deciding whether an MCA is a good fit. It’s ideal for those who:

  • Accept credit card sales: If you accept credit and/or debit card sales, split funding may offer a more convenient repayment plan than a traditional loan.
  • Need a fast funding solution: If your funding needs are an emergency, an MCA is one of the best.
  • Don’t have great credit or enough credit history: Split funding doesn’t require great or even good credit, making it accessible to many who otherwise wouldn’t be able to qualify for a traditional business loan.
  • Don’t have available collateral to offer: Similarly, if you don’t have collateral to offer for a traditional bank loan, you won’t be able to qualify for a typical bank loan. However, an MCA doesn’t require typical hard collateral such as property or liquid cash.

How to apply for a merchant cash advance

Because a merchant cash advance doesn’t require good credit or a hard form of collateral, it’s generally easier to be approved for one vs. a typical loan which requires sufficient proof that you’ll be able to repay the debt.

However, there are still qualification requirements and an application process you should be aware of. The more you know, the more likely you’ll be to get approved and the better terms you’ll be able to get.

How to qualify

The first and most basic eligibility requirement of an MCA is which has been mentioned already: a large portion of your revenue must come from credit card sales.

Additional qualification requirements include:

  • In business at least two months
  • $7,500 or more in monthly credit card sales
  • $10,000 or more in gross monthly sales
  • No open bankruptcies

Merchant cash advance: Good or bad credit vs. credit card sales volume: Which is more important?

We touched on an MCA’s credit card sales volume requirements in this and previous sections as well as its credit requirements.

However, if you’re already convinced an MCA is the ideal financing option for your business and you skipped to this section to see how to qualify, keep this in mind:

Credit is not the most important factor, your credit card sales volume is.

With a merchant cash advance, your credit card sales volume triples as:

  1. The primary qualification factor
  2. The main factor which decides how much you can be approved for, and
  3. Your estimated future credit card sales volume serves as a kind of soft collateral that guarantees to a lender that they’ll be able to collect on the advance

All of this taken together makes your credit card sales volume by far the most important factor for approval.

How to apply

If you’ve been operating in business for more than two months and meet the monthly sales requirements, acquiring a merchant cash advance is a simple matter of being approved.

To be approved for split funding, you’ll simply need to submit an application along with four months of bank and credit card processing statements.

However, in addition to this, you’ll want to gather several documents that may be requested after applying for approval.

A lender will review your credit card processing and bank statements to see that you fulfill the minimum monthly sales numbers. If you qualify, they’ll typically request additional documentation to finalize the approval.

Documents you’ll want to have in order to streamline approval include:

  • Driver’s license
  • Voided business check
  • Credit score
  • Business tax returns

Merchant cash advance alternatives

As we’ve reviewed throughout this guide, a merchant cash advance has several notable benefits.

However, if the tradeoff isn’t to your liking, it’s worth considering an alternative funding method. No matter what it is you need to pay for, the options below are fast and allow approval without perfect credit.

Term loan

Short-term and medium-term loans are closest to a traditional bank loan in that you receive a lump sum in exchange for repayment with interest. The repayment term on short-term loans is typically between 3 months and 2 years and medium-term loans up 5 years.

Business line of credit

With a business line of credit, you get access to a pool of funds which you can tap into whenever the need arises. And, provided you pay back what you borrow, you can then tap into that line of credit again.

Learn more about business lines of credit here.

Get the funds your business needs– fast– with a merchant cash advance

A merchant cash advance is both a fast and convenient funding solution.

In addition to this, it’s an ideal source of extra capital for business owners who either don’t have stellar credit or any form of hard collateral to offer and therefore wouldn’t be approved for a bank loan.

Traditional bank financing takes months for approval. So, whether you need funding fast or need access to capital and don’t qualify for a traditional bank loan, an MCA is an effective source of additional capital worth considering.

Click here to apply for a merchant cash advance and find out what your options are: Apply Now

Frequently Asked Questions

Is a merchant cash advance a safe option?

Before signing a contract with an MCA provider, it’s important to first make sure that an MCA is the right funding method for you and your situation.

An MCA is based on your business’s regular flow of income, so if your business income is in a volatile period, a loan would likely be a better option for you. 

However, if your business income is consistent, even growing, then an MCA may be a good option for you and your business. 

What happens if you default on a merchant cash advance? 

If you find yourself in a position where you can’t pay back your MCA, start by looking at your contract to see what options are available to you in default as it all depends on the advance, provider, and your particular situation.

MCAs are considered a purchase agreement, not a loan, so they’re not subject to the same usury laws as typical business loans. Depending on your provider, they’ll have various options and actions they may take if you breach your contract and go into default. 

For example, your provider may sue for breach of contract, though defaulting doesn’t necessarily mean you breached your contract. For example, if you defaulted because your business closed down, that isn’t a breach of contract and there would be no recourse whatsoever.

If you’re having trouble paying your MCA, give your provider a call to ask what your options are for setting up a revised repayment plan and getting back to current.