Disclaimer: Information in the merchant cash advance articles is provided for general information only, does not constitute financial advice, and does not necessarily describe Biz2Credit commercial financing products. In fact, information in the merchant cash advance articles often covers financial products that Biz2Credit does not currently offer.

Accessing capital quickly can be essential to keep operations running smoothly and manage unexpected expenses. But if you have bad business credit, traditional loans can be difficult to be approved for. However, a business cash advance can provide an alternative way to access the funds you need, without the typical credit requirements that come with bank loans. Instead of a bank loan, you can opt for a business cash advance to get the capital you need. Whether you're a startup with limited credit history or an established business facing financial setbacks, here's what you need to know about getting a business cash advance with bad credit.

How Does MCA Funding Work? 

Merchant Cash Advance (MCA) is a type of financing that gives businesses the ability to sell its future sales for an upfront lump sum of working capital. Unlike traditional loans from traditional banks, MCAs don’t have fixed monthly payments or require perfect credit, making it a potentially great option for some small business owners.

Here's how the application process works: a merchant cash advance lender evaluates your business's daily sales, credit card transactions, debit card transactions, bank statements, and accounts receivables, and offers an advance based on that business revenue. Once approved, the MCA provider advances a lump sum to your business bank account. MCA’s come with a flexible repayment structure by deducting a percentage of future credit card sales. This means that repayment adjusts based on the performance of the business: if your sales are high, you’ll repay more that day, and if sales dip, the payment amount also decreases.

Since this isn’t a loan, there are no interest rates. However, there are factor fees to consider. For example, if you receive a $20,000 advance with a factor rate of 1.2, you’ll repay $24,000 in total. Factor rates range from 1.1 to 1.5.

While MCA funding offers speed and flexibility when compared to other funding options, it’s important to consider the costs. Factor rates often result in higher borrowing costs, so businesses need a solid plan to use the advance effectively and to handle the repayment terms. For businesses that need fast funding and have strong revenue but limited credit, a small business cash advance can be a practical short-term solution.

How To Get MCA Funding with Bad Credit 

MCA providers focus on your business’s revenue rather than your credit score for eligibility, making it an option for businesses that have a steady cash flow but may have encountered credit challenges in the past. To get a business cash advance with bad credit, you’ll need to show consistent monthly revenue, usually through credit card transactions or other verifiable revenue streams. Lenders look for businesses with a stable income, as the advance is repaid by taking a small percentage of future sales rather than fixed monthly payments. This structure makes MCA funding an accessible solution.

Keep in mind that some merchant cash advance companies may charge higher factor rates when lending to those with lower creditworthiness, which can lead to high repayment costs. To mitigate this, look for MCA providers that specialize in working with businesses with bad credit and offer clear terms and reasonable rates.

Considerations for Merchant Cash Advance with Bad Credit

Like any small business loan, it’s essential for small business owners to calculate the total repayment amount to determine if the MCA is feasible given your business’s cash flow. Remember that using an MCA for business financing is best suited for businesses that can sustain the high costs and have a clear plan for how to maximize the use of these funds.

Additionally, consider whether your industry has seasonal fluctuations, as lower revenue periods might make the MCA harder to manage. Evaluating both the cost and repayment period of the MCA will help you make an informed decision, ensuring that this type of funding aligns with your business’s financial health and long-term goals. If it doesn’t you may consider using a business line of credit, term loan, or other small business financing. If you won’t be able to qualify, you may take time to improve your personal credit score with the credit bureaus by checking your credit report for potential negative remarks.

Final Thoughts 

Invoice factoring can be a great financing option for small business funding as they come with a straightforward application that can give you funding within a few days. Before you apply, be sure to know the terms, costs, and potential impact on cash flow to ensure an MCA the right fit for your business.

FAQs about Business Cash Advances with Bad Credit

Why does a business need a credit score?

A business needs a credit score in order for lenders to evaluate them for traditional bank loans and other types of financing.

How do I get a business cash advance with bad credit?

To get a business cash advance with bad credit, look for lenders that prioritize revenue over credit scores and have experience working with businesses in similar situations. Gather recent sales records and bank statements to show steady income, as this will improve your chances of approval.

How do I qualify for a business cash advance if I have bad credit?

To qualify for a business cash advance with bad credit, focus on demonstrating a steady revenue stream, as lenders prioritize consistent daily or monthly sales over credit scores. Providing recent bank statements and sales records can strengthen your application by showing your business’s cash flow stability.

Are there alternatives to traditional business loans for those with poor credit?

For those with low credit, you may consider a merchant cash advance.

Can a merchant cash advance hurt your credit?

A small business cash advance works by using your accounts receivable rather than relying on your credit history. However, if you miss payments, it could hurt your credit score.

Frequent searches leading to this page

Business Cash Advance Bad Credit, merchant cash advance no credit check, merchant cash advance bad credit, company cash advance, merchant cash advance lending

mca interest rate alternative financing options merchant loan business cash advance