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Who is Eligible for a Cash Advance?

March 27th, 2009 · No Comments

The provider determines eligibility for a business cash advance, and each provider will have different standards.  In general, standards for a cash advance and invoice factoring are much more relaxed than those for bank loans.  A provider will  evaluate your business’ level of financial risk, past sales history, and future sales projections.  Since there is no collateral securing the loan, providers bear huge risk in cash advance transactions.  Even though the approval process is generally fast, it is very thorough.

Most providers will consider the following:

  • Monthly credit card sales.  You’ll need to show a sales amount high enough that the advance can be repaid quickly and easily, without too much effect on operations or other business functions.  Most providers have a “base” level of sales that your business must meet to qualify, but this amount can vary depending on which provider you choose.. 
  • Additional financial obligations.  Most providers will ask for a monthly expense and income statement, and determine if your current obligations make repayment of an advance too difficult.  A provider also considers the longevity of your business when looking at obligations, and will usually not approve businesses with liens on property or with existing cash advance repayments in progress.  Both of these are indicators of poor financial health, and tend to be predictors of bankruptcy or that a business will dissolve.
  • Financial records, business plans, and other documentation. A provider will almost always request past credit card receipts as evidence of your current transaction volume.  Some providers also request an outline of what the advance will be used for.


    • All providers have their own set of qualifications, so the actual documentation or sales amounts will probably vary.  A few providers will still approve a merchant cash advance that don’t meet the requirements exactly, but will charge higher fees.  Some providers will also charge extra fees or demand full repayment if credit card sales dip below a certain amount.  Financially responsible businesses tend to get better rates and repayment terms. 

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    Businesses that present the least risk to a provider are the likeliest to be approved for advances.  Here are some examples of specific qualifications from different providers:

  • Business in operation for at least a year
  • Existing property or equipment leases with at least a year remaining
  • Tangible property or assets totaling a certain dollar value
  • Total monthly or yearly sales above a specified amount



    • Again, all of these can be predictive of the financial future of a business.  The more information you can give to the provider, the better.  

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