Following our previous post on “What is MCA?”, below is an overview of how merchant cash advance (MCA) works:
Brokers generally seek out merchants for cash advance opportunities. However, merchants can also seek out funding companies and brokers who can help them receive cash advances. If the Merchant is working with a Broker, the Merchant will need to offer up the following information about its business (which may include the following documents):
1. Owner’s personal information (i.e., DoB, SS#, etc.);
2. Business related information (i.e., EIN, location, etc.);
3. Business’ bank statements from past six months;
4. Business’ credit card processing history from past six months;
5. Existing liens or judgments against the business or owners;
6. Tax returns for the business and its owners.
Using the information provided by the Merchant, the Broker will look through its network of funders to try to find the best “deal” for the Merchant. The Broker may submit the Merchant’s application to multiple Funders and help facilitate the cash advance funding process. In return, Brokers are generally offered a commission for their services.
Funders review each Merchant’s application by putting it through a rigorous underwriting process, which includes credit and reference checks. Funders may work with the Broker or Merchant directly if they need more information about the Merchant.
Once the Funder company approves the Merchant for the cash advance, it will fund the Merchant’s bank account directly. As part of the cash advance deal, the Funder will work with a Collections Company or Retrieval Company to facilitate the collection of the Merchant’s future sales. A Collector or Retrieval Company can be:
1. a credit card processor;
2. an ACH processor;
3. a bank;
4. a lockbox service provider; or
5. the Funding Company itself.
The Collector is responsible for working with the Merchant to collect money from the Merchant’s daily or weekly sales, and allocate the pre-defined percentage or amount of sales to repay the Funder.
Our team understands the merchant cash advance process and we are very close to releasing MCA Suite to the public. With MCA Suite, brokers and funders will be able to manage the entire MCA process from lead initiation to collection in a single platform. Please stay tuned for more product updates.