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How to Fill Out IRS Form W-7 and Obtain Your ITIN Number (Quick and Easy Guide)


What Is IRS Form W-7 Used For?


IRS Form W-7 is an official IRS form used to obtain an Individual Taxpayer Identification Number. 

You typically need form W-7 for filing taxes with the IRS if you’re not a U.S. citizen and either don’t have, or aren’t eligible for, a social security number. 

However, it can also be used for:

  • Obtaining a mortgage
  • Employment settlement disputes
  • Opening an interest-bearing checking account

Read on for a quick and easy guide to filling out Form W-7 and obtaining your ITIN. 

Do I Need an ITIN?

If you’re not a U.S. citizen or if you can’t obtain a social security number for another reason you must have an ITIN to legally pay taxes on U.S. earnings. 

You also may need an ITIN for other reasons, such as applying for an ITIN or opening an interest-bearing checking account. 

Can I Fill Out Form W-7 Online? 

The short answer is: No, in 2024 you can’t fill out Form W-7 or obtain an ITIN number online. 

With that said, be on the lookout for services that claim they can get you an ITIN online. 

They’re not helping you obtain an ITIN online but rather digitally obtaining your information when you submit their online form and then physically printing and mailing out your W-7 form for you. 

These services can not get you your new ITIN number any faster than you can if you simply fill out the form, print, and mail it yourself (and for much less than what they charge). 

How to Fill Out IRS Form W-7(Step-By-Step Instructions)

Unfortunately, the only way to submit Form W-7 and obtain an ITIN is by mail or in person.

However, it’s a simple one-page form that’s pretty self explanatory.

Just make sure to:

  • Fill out any and all relevant information, and
  • Do not leave any field blank. If a field doesn’t apply to you, write “NA” in the field instead of leaving it empty

Start by downloading the official PDF form here: Form W-7

Then follow these steps:

1. Select your reason for submitting

First, start by selecting the reason that you’re submitting Form W-7:


Note that the instructions state that unless your reason is “a” or “h”, you must submit your federal tax return with Form W-7.

2. Enter your name and address

Next, you’ll fill in your name and one or two addresses.

The first is your current address. The second is your foreign address:


If you no longer have a current foreign address, the place where you resided before coming to the U.S., then you’ll simply fill in the country in which you resided.

3. Other information

Form W-7 has a whole section for additional information, at least some of which is relevant to you:


Make sure to fill in any and all information that is relevant to you. 

Most importantly, notate what identification documents you submitted as well as previous or current countries of citizenship, foreign tax ID numbers, and Visa info (if you have one). 

Also, if you’re requesting a new ITIN, fill out sections 6e and 6f.

4. Sign and date

Lastly, sign and date your form:


Make sure to sign the top section and ignore the second as that is only relevant if you visit an acceptance agent in person. 

3 Ways to Submit Form W-7

While you can’t submit Form W-7 online, there are at least a few options for sending it out, two which allow you to handle it in-person (though the wait time for a response with your new ITIN still applies).

Those methods are: 

1. Physical Mail

The first option is simply to mail it yourself.

One of the benefits of Form W-7 is that you can mail it along with your tax return, allowing you to knock out two birds with one stone (at least, if you had planned to physically mail your return). 

In order for your form and return to be accepted, you’ll need to mail it along with proof identity, your tax return, and foreign status documents and send to this address:

Internal Revenue Service
Austin Service Center
ITIN Operation
P.O. Box 149342
Austin, TX 78714-9342

Keep in mind that it can take up to 14 weeks to receive your documents back from the IRS, which means you’ll want to use options #2 or #3 if you’ll need them during that window of time.

2. In Person Option 1: Certifying Acceptance Agent

A second option is to apply in-person with a Certifying Acceptance Agent

This is a good option for anyone who isn’t comfortable having to mail sensitive information such as your proof of identity and foreign status docs.

3. In Person Option 1: Taxpayer Assistance Center (by Appointment)

A final option is to make an appointment at an IRS Taxpayer Assistance Center

Again, this is also ideal for anyone who isn’t comfortable having to mail sensitive information.

There isn’t much difference between this and an Acceptance Agent, it’s more about what happens to be in your area. Both are viable in-person options. 

How to Check the Status of Your W-7 Application

You can call the IRS directly at 1-800-829-1040 to check the status of your application seven weeks after submitting. 

How Long Does It Take for the IRS to Process Form W-7

According to official IRS documentation here, the typical wait time to receive a response and obtain your ITIN is 7 weeks during normal periods and up to 11 weeks during peak season from January 15th – April 30th (i.e. tax season).

Looking for Business Funding? Get Funded Fast with Excel Capital

IRS, big banks, traditional financial institutions. They all have one thing in common: complicated paperwork processes and long wait times.

At Excel Capital, we understand how difficult it can be to obtain a traditional business loan, whether via a big bank or financial institution.

Increasingly higher credit requirements, massive qualification hoops to jump through, and low approval odds has made obtaining traditional business funding harder than ever.

We’ve helped thousands of business owners obtain the capital their business needs with a simpler process: 

  • Short application
  • Fast approval time
  • Low to no credit options
  • And straightforward answers

Apply with Excel Capital today:

Get the capital your business needs without the hassle. Apply for a small business loan with Excel Capital: Apply Now

Best Bad Credit Business Loans of June 2024


If you’re a business owner in need of a loan, but you have bad credit, you have options.

Below, we’ll cover the best bad credit business loan types of June, 2024 and how to get each.

We’ll also cover below that what should you know going into the process looking for a bad credit business loan if this is your first time.

Read on to find our the best bad credit business loans of June, 2024.

Have bad credit? Apply for a small business loan with Excel Capital with no to low credit requirements: Apply Now

4 Best Business Loans for Bad Credit: June 2024

These are out top picks for best bad credit business loans of June, 2024:

1. Unsecured business loan

Below are several alternative financing options, all with their own specific benefits, and based on different financial needs.

No matter what stage you’re at in your business, there’s a vehicle that will help you get the funding your business needs.

An unsecured business loan is a loan based primarily on your cash flow and gross sales, up to as much as $2,000,000.

An unsecured business loan does not require any form of hard collateral, making it a safe and effective option for virtually any business.

A lender may require you to offer a type of limited collateral as security if you can’t repay the loan. However, typically, this is only a percentage of future sales and not something such as property or cash savings. And that means if you go out of business, you’re not required to pay back the loan.

In addition, because they’re unsecured, interest rates tend to be higher. So, keep that in mind when deciding which financial vehicle is best for your business. 

Learn more about unsecured business loans.

2. Merchant cash advance / Split funding

Split funding, also known as a merchant cash advance, remits (or deducts) a percentage of your daily credit card sales to repay the loan.

This makes them great for businesses whose cash flow fluctuates, making it difficult to make consistent, on-time monthly payments throughout the year.

When business is good a larger amount is deducted. However, when cash flow is down, that amount is smaller, helping your business adapt with your fluctuating cash flow.

Because of the nature of this type of loan, consistent cash flow from credit card sales is required for approval.

Learn more about Merchant Cash Advances

3. Term loan

This includes both short-term and medium-term loans, each designed to fill either a short-term or medium-term business need.

Think of it as a quick infusion of cash for a specific purpose such as new equipment, hires, or extra material before a busy season.

These types of loans are ideal when you specific lump sum for a one-time purchase or cash boost.

Learn more about term loans.

4. Business line of credit

Similar to a credit card, a business line of credit is a revolving credit amount which you can use continuously as the need arises.

This is a trade-off for lower loan amounts and higher interest rates. If you have high seasonality, making your cash needs much greater during one part of the year than the rest, a business line of credit could be ideal.

Business lines of credit don’t require collateral. However, due to that, your credit score generally needs to be on the high end of bad to fair (540+).

Learn more about business lines of credit.

Can You Get a Business Loan with Bad Credit?

In the past, banks controlled small business financing and anything less than a 700 credit score just didn’t cut it.

But now? Fortunately, that answer is a resounding yes.

So, how can you be approved for a business loan with bad credit if that was such a weighty requirement in the past?

Through the advancement of financial technology via the fintech revolution, and the understanding that running a business can leave your credit score in bad shape, a more comprehensive approval process has been developed.

Options that focus on the present and the future and no the past.

Bad credit small business loans typically gauge your cash flow and revenue instead of focusing on your credit.

Many great options for bad credit business loans are now available– options that weigh the strength of your business as a whole, from cash flow to your debt-service coverage ratio, instead of just your credit score and financial statements.

By balancing these additional factors, lenders can obtain a better overall view of your business’ health and offer you capital even with bad credit, provided your business is stable and profitable.

Now, you can get the funding your business needs to grow with less than perfect credit.

Excel Capital: Making Bad Credit Business Loans Easy

Small business owners are often turned away by traditional lenders when they have a less than perfect credit history. You may have experienced this first-hand.

Sure, your credit score matters. But it doesn’t tell the whole story and it isn’t a completely accurate assessment of risk (which is what lenders use to qualify you for funding).

At Excel, we realize that when starting a business, sacrifices sometimes need to be made to pave the way for a brighter future.

We believe there’s more to the story of your business. And we believe in your opportunity to grow your business to its full potential with access to capital when it matters most.

With options that require no personal guarantee or collateral as well as funding (and approval) in as little as 24 hours, Excel Capital can give your business the funds it needs to move your business forward, in good times and bad– and even with bad credit.

Complete our online application and see how much you can be approved for: Apply Now

What Credit Score Is Needed for a Business Loan?


Firstly, what exactly is considered ‘bad credit’? 

There are several credit scoring models, whether it be from VantageScore or FICO, however, the most widely accepted model (FICO) is shown below.

Traditional vs Alternative Funding

While every type of loan is different, a credit score of over 700 is typically required for traditional bank loans. In contrast, many alternative business loan products have no credit score requirement at all.

And, of those that do, credit score requirements are low. In the <fair> (580+) range, significanlty  lower than traditional business bank loans.

What Factors Impact Your Credit Score? FICO Score Breakdown


  • 800 to 850 is exceptional
  • 740 to 799 is very good
  • 670 to 739 is good
  • 580 to 669 is fair
  • 300 to 579 is generally the ‘bad credit’ range

And this basic scoring model uses these parameters to generate your score:

Keep in mind, as mentioned above, there is no one single accepted scoring model for all types of loans. Each type of loan uses a slightly different model. However, this is the most common.

Typically, a credit score of over 700 was required for traditional bank loans (and that’s still the case today).

However, many alternative business loan products have no credit score requirement at all. And, of those that do, credit score requirements are low, in the “fair” (580+) range, significantly lower than traditional business loans.

Is personal credit or business credit used for business loan approval?

It’s important to note that when we say credit score, we’re talking about your personal credit score, not your business credit.

That’s a really important distinction, partly because personal credit is much easier to fix than business credit.

It’s also important because a lot of business owners think their business credit is the main factor for consideration when applying for a loan.

In most cases, the only lenders that will look at your business credit are traditional lenders such as banks.

Alternative, or non-bank, lenders such as Bizfi and Paypal working capital focus on your personal credit score when evaluating business funding with bad credit, so that’s what we’re talking about here.

Action Step: Get your personal credit report

Before we get into what kind of loan your credit might be able to get you, it’s important to get your most up to date credit report.

If you haven’t checked your personal credit report in a while, don’t worry, it’s easier than ever to get your report for free (assuming you haven’t gotten it already this year).

Once a year, you can get your personal credit report from Annualcreditreport.com (technically, the only authorized website for free credit reports), so grab that now so you know the information you’re working with is current.

How can we fund you even if you have bad credit?

There are several reasons why we can fund you if you have bad credit.

However, the most important point is what we touched on above: there’s more to your business’ health than just your credit score and the items on your credit report.

Your credit report includes a series of snapshots. It could include accounts from several years ago.

Chances are, you’re not the same person– and your business isn’t in the same position– then when you missed those payments or defaulted on that loan.

Lenders will still take note of it. But again– it’s not the whole story.

Our process is different from traditional lenders. We take several factors into consideration that tell a more well-rounded story of the health of your business.

What is your cash flow like? How much debt do you have? What is the difference between the two? Are you on a growth trend or is your business cutting staff because the industry is being phased out?

There’s so much more to your business than just your credit score and it’s our goal to offer a fairer and more ‘complete’ system for loan approval than traditional lenders.

Complete our online application and discover how much you can be approved for: Apply Now

How to Get a Business Loan with Bad Credit

So, now you know your options. But what will you need to apply– and get approved– for a bad credit business loan?

First, let’s look at what lenders typically look for in applicants so you can maximize your chances of being approved.

What do lenders look for?

As far as your credit, these are important things to make a note of:

  • Bankruptcies
  • Foreclosures
  • Tax liens

None of the above disqualify you. However, it’s important to keep in mind that if they were recently placed on your credit report, they will have an impact. So, you’ll want to make sure all your other ducks are in order as best as possible.

However, as we talked about earlier, alternative lenders look at more than just your credit score.

Here are a few more things which are important to keep in mind:

1. Annual revenue

One of the most important factors, annual revenue lets lenders know how your business is doing in the broadest sense.

Is revenue increasing each year? Is it down? This is also an important factor for deciding what size of loan you’re approved for.

2. Current debt obligation

Do you already have a business loan? Are you currently paying it off? And is there collateral involved?

Most lenders don’t like to see that you already have a business loan with someone else.

This doesn’t just mean that it may be harder for you to pay them back. It also means that, in the case of defaulting on a loan and potential matters of collateral, they’ll be “second position”.

That means they will only be able to collect after the first lender does, which a lender does not like to see.

3. Cash flow

We covered annual revenue and profitability, however, cash flow tells lenders much more that neither revenue or profitability can.

Lenders want to see not only how well you manage the money that comes in, whether you properly handle your expenses but also how much spare cash you keep on you at any given time.

If something were to happen tomorrow and your cash flow dips, could you continue to pay your loan off? Lenders want to see that this is the case.

4. Profitability

Closely related to annual revenue, profitability is one of the best ways for telling how effectively you’ll be able to repay a loan.

While annual revenue is important, if you have a huge revenue but very little actual profit, your business isn’t actually doing as well as it looks.

Most Bad credit business loans under 100k do not require a profitability review. However, when the business loans get higher some institutions may request copies of your financial statements to review your bottom line.

What do you need to qualify for a business loan with bad credit?

  1. What do you need to apply?

    Most loan programs require that you’ve been in business for 6 months – 2 years and are in good standing.

    For most programs, there is:

    • No minimum credit score
    • No collateral required
    • And, for unsecured business loans, you need just $10,000 in monthly gross revenue to apply

*Keep in mind that each loan program is structured differently, therefore requirements for application and approval will defer slightly.

  1. …and what documents do you need for approval?

    • Completed application
    • Copies of last 4 months of business bank statements
    • And last 4 months of processing statements (if applicable)
    • Drivers license
    • Voided business check
  2. Documents that may be requested prior to funding (after your application has been submitted):

    • Proof of ownership
    • Profit & loss statement
    • Property lease agreement & landlord contact information
    • Personal and/or business tax returns
    • Business licenses
    • Debt schedule

How to qualify for a bad credit business loan

Now that you have a better idea of what lenders are looking for when you apply for a bad credit business loan of any kind, what do you need to qualify?

Generally, every one of the loan options we mentioned earlier requires that you’ve been in business for at least six months to one year and are in good standing.

For most loan options, there is:

  • No minimum credit score
  • No collateral required, and
  • For unsecured business loans: you need only $10,000 in monthly gross revenue to apply.

However, keep in mind that any additional requirements all depend on the type of loan. 

If you’re unsure which loan product you’d prefer, don’t worry.

When you submit your information through our short online application, we’ll guide you through the entire process to decide not only which product would be the best fit but also additional requirements you’ll need to complete your application.

In addition to the above, each loan type requires several documents which you’ll need to apply. Let’s talk about those now.

What documents do I need to apply?

Each loan program is slightly different, but the majority of documents are the same across the board.

Here’s a short list of documents which you may be required to provide to complete your application (Hint: they’re not required for submitting an online application, only afterward for approval):

Documents needed for approval:

  • Completed application
  • Copies of last 4 months of business bank statements
  • Copies of last 4 months of processing statements (if accepted at your business)
  • Drivers license
  • Voided business check

Documents that may be requested prior to funding (after your application has been submitted):

  • Proof of ownership
  • Profit & loss statement
  • Property lease agreement and landlord contact information
  • Personal and/or business tax returns
  • Business licenses
  • Debt schedule

Not all of these documents will be required for each program. However, it’s important to know in advance so that you can put your things in order; Especially if you’re looking to receive funds quickly.

Obtain a Bad Credit Business Loan with Excel Capital

You’ve reviewed your options, put your things in order, and now you’re ready to apply.

Ultimately, you’re the best judge of what your business needs and when it needs it.

But if you know your business needs cash and not getting it will hold it back from growth– you need to do everything you can move the business forward.

We’ve made it simple and easy to get your business the funding it needs. Often, in as little as 48 hours.

Don’t let bad credit hold your business back from getting the funding it needs to grow.

 Complete our online application and see how much you can be approved for: Apply Now

Frequently Asked Questions (FAQ):

1. How can I improve my bad credit score to obtain a better loan offer?

To turn your bad credit score into an excellent credit score:

1. Pay your bills on time

The easiest (and likely best) way to improve your bad business credit score quickly is by paying your bills on time. That’s all there is to it.

Now that you have a loan you’re in a unique position to rack up a history of on-time payments and the credit score bump that happens over time from doing so. Both of these will play a big part in getting approved for a better business loan down the line.

Also, if you want to take it a step further and look really good to loan companies make payments in advance whenever possible.

2. Keep your credit lines open

A lot of business owners think canceling all of their credit cards is the best solution when they find themselves in a rut, however, this is one of the worst things you can do.

Closing your credit lines will cause your overall business credit lines to decrease both quickly and dramatically, negatively impacting your overall credit score.

Even if the balance is zero this helps poor credit get better and doesn’t have you pay an interest rate since your not using any of the lines of credit available to you.

Instead, pay off your balances steadily and consult a credit professional if you believe you need additional help.

3. Monitor your balances

Paying your monthly payment and other bills on time is great, but paying down your balances when you can to under 10% will increase your overall credit score tremendously.

So, make sure to monitor your balances and plan payments accordingly so that you stay below that as often as possible.

4. Watch your credit report

Lastly, one of the most important things you can do is monitor your credit report.

Look for errors, chargebacks, items that have been sent to collections, etc. and handle them as you see necessary.

Taking the extra time to make sure your report is accurate and up-to-date can go a long way.

And, with all of these points taken together, the next time you are looking for business funding with bad credit so you can get the best terms possible.


2. What are the benefits of no credit check business loans?

No credit check business loans are beneficial for businesses owners that are looking to keep their credit score in top shape while still obtaining working capital to help grow their business.  

By obtaining small business loans with no credit check, you can avoid business financing affecting other personal funding that is being worked such as:

  • A home mortgage
  • Car loan applications
  • Home equity lines 
  • or any other personal transactions that are not related to your business.
3. What is a good credit score for a business loan?

Most bank loans require at least a 680 credit score, many as much as 720 and above.

However, bank loan approval processes are notoriously lengthy and they require huge amounts of paperwork. As a result, if you’re in need of funds moderately fast, they’re unreliable.

Alternative funding with Excel has no base credit requirement and approval (and payout) is fast– with most loan products being within 24-72 hours. 

4. Does a business loan affect your personal credit?

In some cases, a business loan can impact your personal credit. Some loan agreements require a personal guarantee, in which case the loan will impact your personal credit. In other cases, if you’ve placed personal funds down as collateral it can also affect your personal credit.

If you have bad credit, a business loan is a perfect opportunity to improve your personal credit score substantially. So, take full advantage of that opportunity and make sure to pay each regular payment on time until your loan is paid off. 

What Is IRS Form 4506-T? + How to Get Your Tax Transcript


What Is IRS Form 4506-T?

IRS Form 4506-T is an official IRS form used to request a tax return transcript.

Typically, Form 4506-T is used when you need to provide your tax return information for the purposes of:

  • An IRS audit
  • Applying for a mortgage loan
  • Getting approved for a business loan
  • Or verifying information from the previous year when filing your next tax return

So, how do you get a copy? Here’s how: 

How to Obtain Your Tax Transcript from the IRS

Fortunately, obtaining your tax transcript and related tax information is easier than ever.

While you can fill out Form 4506-T and wait for a response from the IRS, it’s no longer the fastest or easiest way.

Instead, you can create an IRS.gov tax account and log in within minutes.

Starting from IRS.gov, hover over the drop down menu under “File” and click “Get Your Tax Record”: 

Next, in true IRS fashion, instead of sending you straight to the portal where you can get your tax information, it sends you to another page.

Click on “Online Account”:

And another, click on “Sign in to your Online Account”: 

Lastly, click “ID.me – Create an account”:

You’ll have to submit official identification information, but by doing so you can get fast and convenient access to your official federal tax information.

This method is the fastest and most reliable, as it’s both quick as well as direct from the source. No other tool or service needs to be used to obtain your official tax information. 

To get all relevant tax transcript records, via the portal you’ll want to request a “Record of Account” for the most comprehensive individual tax records. 

Alternatively, you can send Form 4506-T to your local state IRS office or request a transcript by calling: 1-800-908-9946.

How to Fill Out IRS Form 4506-T (Step-By-Step Instructions)

Now, let’s go over how to fill out IRS Form 4506-T.

While it is a bit old-school to request your tax transcript through filling out a traditional Form 4506-T and sending it to the IRS, in some cases it may be your only option.

So, start by downloading the form via the IRS’s official Form 4506-T PDF link here then follow the below steps to fill it out: 

Step 1: Line 1b: Enter your EIN / SSN / TIN

On line 1b, enter your EIN if you’re requesting access to a business return:

If it’s a personal tax return, enter either your SSN or TIN, whichever is applicable to you. 

Step 2 (Line 3): Enter your address

One line 3, enter your complete current address, the address where you’d like to receive the copy of your transcript:

On line 4, enter your old address (the one you used to file your last return) if you’ve changed your address since your last filing.

Step 3: Sign and date

Lastly, make sure to sign and date Form 4506-T (same name as listed on line 1a):

Keep in mind that the date the IRS receives the form must be within 120 days of the date you write on the form when signing, otherwise they will reject it.

How Long Does It Take to Get Your Tax Transcript from the IRS?

According to official IRS documentation, the IRS takes 75 days to respond by mail with tax transcript documents.

However, fortunately the IRS now offers a way of obtaining your tax transcript and other information online. See the section above, “How to Obtain Your Tax Transcript from the IRS” to find out how.

Why Is My Lender Requesting Form 4506-T?

If you’re applying for a loan, in some cases, the lender may request Form 4506-T to obtain your tax information. 

The purpose for this is to verify income, typically as a secondary income verification source.

Looking for Business Funding? Get Funded Fast with Excel Capital

At Excel Capital, we understand how difficult it can be to obtain a traditional business loan.

Increasingly higher credit requirements, massive qualification hoops to jump through, and low approval odds has made obtaining traditional business funding harder than ever.

We’ve helped thousands of business owners obtain the capital they need to move their business forward, including flexible funding tools with low credit requirements and a simple and straightforward application.

Apply with Excel Capital today:

Get the capital your business needs– fast. Apply for a small business loan with Excel Capital: Apply Now

Merchant Cash Advance: Pros & Cons + How to Qualify [2024 Guide]


What Is a Merchant Cash Advance?



As opposed to a traditional small business 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 debit and credit card sales in exchange for a fee.

An MCA is generally much faster than a traditional loan as well, 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, especially if you have strong cash flow.

Get Fast Funding with Excel Capital

The quality of your credit shouldn’t bar you from obtaining funding for your business.

At Excel Capital, we understand that a bit of capital, used wisely, can be just what you need to take your business to the next level.

We’ve helped thousands of business owners obtain the cash they need to move their business forward. Let us help you do the same.

Apply with Excel Capital today to see what you can be approved for:

Get the capital your business needs– fast. Apply for a small business loan or merchant cash advance with Excel Capital: Apply Now

How a Merchant Cash Advance Works

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

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 on those days to repay the advance 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 business credit card sales, so he’s approved for the $20,000 advance amount 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

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 business 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

Merchant Cash Advances: Pros and Cons

Merchant cash advance pros and cons


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.

Here are the primary benefits, and drawbacks, of a merchant cash advance:

Merchant Cash Advance Pros:

  • 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.

Merchant Cash Advance Cons:

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?

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 for a Merchant Cash Advance

How to qualify for a merchant cash advance


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 for a Merchant Cash Advance

How to apply for a merchant cash advance


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

Small Business Loans and Other 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 a merchant cash advance with Excel Capital

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.