Many business owners worry about their credit history when applying for a Merchant Cash Advance (MCA). There’s a common belief that a less-than-perfect credit score will automatically disqualify them. But is this the case? Let’s explore the role of credit history in MCA applications and separate myths from reality.
Understanding the Role of Credit History in MCA Applications
Merchant Cash Advances (MCAs) give businesses rapid access to money by advancing a large payment in exchange for a percentage of future credit card transactions. Unlike loans, MCAs care more about daily credit card sales than personal credit scores, so even businesses with bad credit can qualify.
Here are five common myths related to credit history when it comes to MCA applications:
Myth 1: A poor credit score means no MCA approval
Reality: MCAs are open to businesses with weak credit since they prioritize daily credit card sales over individual credit scores.
Myth 2: MCA providers never verify credit history
Reality: While MCAs are less concerned with credit scores, lenders conduct credit checks to determine overall risk. However, they emphasize your company’s cash flow and sales record.
Myth 3: High credit scores ensure MCA approval
Reality: Even with higher credit scores, approval is not guaranteed. The reason is that MCA providers consider many factors, such as the consistency of your business’s revenue and the type of industry. So, a good credit score can be helpful, but it will not guarantee approval without good business performance.
Myth 4: MCAs can enhance your credit score
Reality: MCAs do not hit your credit report directly since they are not standard loans and aren’t typically reported to credit bureaus. Being responsible with an MCA does, however, improve your business’s bottom line, thereby indirectly bolstering your credit profile.
Myth 5: Only struggling businesses use MCAs
Reality: MCAs are used by businesses of all sizes and financial positions for various purposes, including cash flow management, capturing growth opportunities, or addressing unexpected expenses. It’s not a last resort but rather an adaptable form of financing.
While credit history is important in MCA applications, it is not the only determining factor. MCA providers prioritize a company’s revenue and ability to repay the advance. If you are an MCA supplier searching for high-quality MCA applications, contact us for more information.