How Long Does it Take to Get Approved for a Merchant Cash Advance?

Getting approved for a merchant cash advance can provide much-needed working capital for small businesses struggling with cash flow issues. However, merchant cash advances come with high costs and strict repayment terms, so they should not be entered into lightly. This article will examine the merchant cash advance approval process timeline and provide tips for securing funding quickly.

What is a Merchant Cash Advance?

A merchant cash advance (MCA) is a form of alternative small business financing in which a company provides a lump sum of cash to a business in exchange for a percentage of future credit card sales. It is not a loan – there is no set repayment schedule or interest rate. Instead, the business repays the advance through daily or weekly withdrawals from credit card receipts until the full amount is repaid, which is usually within 6-12 months.

MCAs allow businesses access to capital quickly, often in as little as 24-48 hours, which can be critical for covering short-term cash flow gaps. However, MCAs come at a steep cost, with factor rates and fees equivalent to APRs over 100%. Businesses should explore all financing options before resorting to an MCA.

MCA Approval Process Timeline

One of the main benefits of an MCA is the quick approval process compared to traditional bank loans. Here is a general timeline for getting approved:

• Application – The application can be completed online in as little as 10 minutes. You will need to provide basic information about your business, ownership, and monthly credit card sales.
• Review – The MCA provider will review your application and request any additional documentation needed, such as bank statements, merchant processing statements, and business tax returns. This review may take 1-3 days.
• Approval – Once approved, you will receive a term sheet detailing the advance amount, factor rate, and repayment terms. This is usually provided within 24 hours of completing the application.
• Underwriting – The MCA company will conduct additional due diligence such as verifying bank accounts and performing a site inspection. This may add 1-2 days.
• Contract – You will need to review and sign the MCA contract. Be sure to understand all terms and fees before signing.
• Funding – Once the contract is signed, funds are usually deposited into your bank account within 24-48 hours.

The entire process, from application to funding, can be completed in as little as 2-4 days if you provide all requested information promptly. It is much faster than a standard small business loan.

Factors that Determine Approval Speed

While MCAs can fund quickly, several factors can impact the approval timeline:

• Your credit score – Having a credit score above 600 will help, even though MCA approval is based primarily on credit card sales.
• Time in business – Being in business for 6+ months demonstrates stability.
• Credit card volume – Higher monthly credit card sales make approval more likely.
• Accuracy of application – Providing accurate figures and promptly submitting all requested documents keeps things moving.
• Communication – Being responsive to questions and available by phone or email prevents delays.

As a rule of thumb, you can get approved in as little as 24 hours with strong business metrics, a high credit score, and excellent communication. For newer businesses or those with risk factors, it may take 3-5 days.

Tips for Getting Approved Quickly

If you need an MCA urgently, there are a few tips that can help expedite the process:

• Have your documents ready – Bank statements, tax returns, merchant processing statements, etc. This avoids delays waiting for you to provide them.
• Apply with an online lender – Online MCA providers are able to approve applications faster than traditional lenders.
• Provide accurate figures – Inflating sales or revenue to appear more qualified can backfire and stall approval.
• Choose reputable providers – Well-established MCA firms process applications efficiently.
• Follow up diligently – Politely follow up if you have not heard back within expected timeframes.

While MCA providers advertise approvals in 24-48 hours, it can sometimes take longer. Calling the lender to check status and ask if any other information is needed can help speed up the process.

What Happens After Approval?

Once approved, you will receive a term sheet that outlines the advance amount, factor rate, and repayment terms. Factor rates typically range from 1.1-1.5, meaning a $100,000 advance may have a repayment amount around $140,000.

You will need to review and sign the full MCA contract. Be sure to understand the contract fully, as it can be difficult to get out of an MCA agreement once signed. Legal review is recommended.

Funds are usually deposited as a lump sum within 24-48 hours of signing the contract. The lender will immediately start collecting the agreed percentage of daily or weekly credit card sales.

It is critical to have a plan for how the funds will be used to generate revenue to repay the MCA quickly. Defaulting can result in the lender suing for the full repayment amount.

The Bottom Line

Getting approved for an MCA can take as little as 2-4 days from application to funding, but may take longer depending on your qualifications. While MCAs provide fast access to capital, the high costs and repayment terms deserve careful consideration. Be sure to understand the full terms of the MCA agreement prior to signing.

With strong business metrics, prompt communication, and a transparent application, you can get approved for an MCA quickly. However, traditional financing like SBA loans may be more affordable if you have time to spare. Assess both the urgency of your capital needs and the long-term costs before committing to an MCA.