If you are a business owner, you may have heard that approval rates on loans from traditional banks have not recovered since the Great Recession of 2008. This is particularly true among loans worth less than $1 million. Luckily, however, there is another option—business cash advance programs as well as other online loans have stepped in to fill this gap.
Wondering how to successfully apply for one of these loans? Take a look at these tips:
1. Have trackable income.
Every merchant cash advance lender is different, but in many cases, these lenders look at data related to your business sales. In particular, they may want to see revenue reports or deposit records from your business checking, PayPal, or Square accounts. If you are currently accepting a lot of cash payments, there is no paper trail, and thus, the lender has no way to assess your revenues. To ensure the lender takes all of your income into account, make sure that your income is well recorded and trackable.
2. Be prepared to share data.
In many cases, merchant cash advance lenders look at more than just your revenues. As these companies often don't take credit scores into account, they have to utilize other models of credit worthiness. Because of this, they may want to see data from a range of sources. For example, they may want to see your seller rating on eBay. To help facilitate this process, be ready to share data as requested, and have your login details ready when you apply for the loan.
3. Clean up your accounting records.
In addition to taking into account information from some of the above sources, many online lenders are also willing to look at your accounting records. In particular, if you use an online accounting app like QuickBooks or Xero, that information may be useful. If you want to improve your chances of approval, make sure that you have clear, well organized accounting information.
4. Choose a repayment plan you can afford.
If you get approved for a merchant cash advance, you need to repay it in a timely fashion. That can also help to improve your chances of getting subsequent loans with that lender. To ensure you can repay the loan, look at the repayment plans carefully and choose one you can afford to repay. In many cases, merchant cash advance companies tie their repayments to one of your accounts, and they take payments whenever a deposit is made into that account.
In most cases, the repayment options will be based on a certain percentage of your income. Take some time to crunch the numbers and make sure that you opt for a plan that you can afford.