FICO Score Requirements for Merchant Cash Advances

Merchant cash advances are not available for all businesses. There are certain FICO score requirements which must be met before a merchant cash advance will be given to a business. If yo think your business could use a merchant cash advance, take a closer look at the requirements and FICO score you should have before applying. 

What is a Merchant Cash Advance?

A merchant cash advance is a loan on the credit card sales your business processes each month. The loan is generally $150,000 or less and is paid back through sending a portion of each credit card transaction back to the lending company. The business cannot get a loan like this if credit cards are not accepted at the establishment, or if a certain sales volume is not achieved each month. The maximum loan amount is based on the income of the business. While they are paid back gradually with each transaction, the fees associated with these loans could be as much as 30%, making them a costly option. 

What are FICO Score Requirements for Merchant Cash Advances? 

While some lenders won't pay attention to the FICO score, generally, lenders want to see a credit score of at least 600 before they are willing to lend based on the credit card sales of the company. Before agreeing to a loan with a specific lender, ask about their credit requirements. If you know you don't meet them, save yourself the inquiry and move on. If you meet the requirement, be sure to discuss all the other terms of the loan before agreeing to anything. 

Some lenders will offer loans to lower credit scores, but the rates and fees for these loans will be high. Typically, the rate can be higher by as much as 5 to 10 %. Also, the fees can be twice as much as traditional loans. Be careful when choosing this program and examine long term costs closely.

What are the Other Requirements for Merchant Cash Advances?

There are several qualifications a business must meet before it is eligible for a merchant cash advance. These will vary from lender to lender, but will include a target dollar amount the business must sell in credit card transactions each month. Make sure you get a full list of the lenders requirements before starting any loan applications, to save both you and the lender some time. Shop around for the best merchant cash advance lender to ensure you are getting a good deal.

This type of loan is usually an option for new businesses or those who don't have the best credit records, but it is generally considered a costly option. Some may even go so far as to say a merchant cash advance is the equivalent to a personal payday loan. While they will help in a pinch, they will do more harm than good in the end, and should considered only in situations where funding is necessary and not available from any other source.

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