Qualifying for Merchant Loans

Merchant loans can technically describe any type of borrowed funding used by a business. Most typically, however, the term refers to cash advances for businesses. This type of funding is not really a loan in the strictest sense of the word. Rather, it is an advance on future earnings. Whereas a true loan will have a fixed business loan interest rate attached, merchant loans are not subject to the same rules and might end up costing a company more over the long run.

Although they can have some financial disadvantages, merchant loans are favored by some because of the ease of the application and qualifying process. In most cases, this type of funding is very easy to qualify for. Approval does involve multiple steps though.

Step 1 – Getting Ready For A Merchant Loan Application

The first step that should go into an application process for a merchant loan is a careful weighing of the options. This type of loan, as stated, can end up costing a company more than the standard business loan interest rate. To determine if a cash advance is the right way to go, review these things:

  • Current business interest rates
  • The company’s credit standing
  • The company’s actual needs for financing
  • The terms being offered by the company funding merchant loans

Step 2 – Gathering The Necessary Paperwork

Perhaps the biggest advantages merchant loans carry with them is the fact they are so simple to qualify for. Generally companies need only prove a certain amount of monthly income to qualify. This income, however, must come from credit cards since repayment will most likely come right off the top of future credit card earnings.

To expedite the application process, gathering a few bits of information can prove helpful. While requirements can vary based on the actual cash advance company being dealt with, these items are generally needed:

  • Basic information about the officer taking out the cash advance, such as name, address, company name and telephone numbers
  • Credit card information, including the current card processor and the amount of monthly income
  • The length of time in business since most merchant loans have a minimum requirement
  • The reason for the advance

Step 3 – Filling Out the Forms

The paperwork involved in merchant loans is commonly very short and to the point. To gain approval, it is best to be thorough in filling them out, however. Answer questions honestly and hold off on sending in an application until figures and facts are checked and double checked for accuracy.

Step 4 – Waiting For The Answer

Once the papers are filled out and submitted, the final phase of gaining approval for merchant loans is simply involves playing the waiting game. This, however, tends to be very abbreviated when compared with other types of financing. Merchant loans are typically approved within a few days rather than taking weeks or months. If approval is granted, funding will most generally only take a short while to arrive.

Gaining approval for merchant loans is a fairly painless process that makes this type of funding very attractive. Business owners should, however, carefully weigh their options to make sure the allure of fast approval and funding isn’t going to cost them more in the long run.