Ali Habib Mayar is an authority figure in the merchant cash advance industry who passionately helps small businesses get access to needed capital. He is the founder and CEO of a New York-based merchant cash advance company called Platinum Rapid Funding Group.
While working at Platinum Rapid Funding Group he is often asked what is necessary to for customers to acquire financing for their business. Here are his eight tips for securing financing for your business.
1. Avoid Negative Balances
Business cash advance or merchant cash advance companies scrutinize the financial health of borrowers before underwriting any advance. Therefore, it is important that your bank accounts show positive transaction history. Avoid having insufficient funds and frequent bounced checks.
Funding companies must make sure that you can provide timely payments before approving a cash advance. If your track record clearly has signs of constantly not meeting financial obligations, then your request for financing may not be granted.
2. Maintain a Strong Daily Balance
Getting a negative balance will not get your business any financing, but not maintaining a strong daily balance may prevent you from getting a longer term and a lower rate. To get the best rates possible, make sure that you keep a high average daily balance as much as possible.
Funding companies favor businesses that show strong consistent balance to meet financial obligations. Once you maintain a strong daily balance, you are more likely to get the best financing options from any creditor. It can also improve your credit score, thus increasing your chances of getting loans and other financing options in the future.
3. Avoid Bad Credit
Business owners with credit scores below 650 are considered high risk borrowers and most funding companies shun away from them. Always ensure to keep a fair or better credit score to increase your chances of securing financing at any time.
Merchant advance companies look at credit scores to assess risk. Delinquencies, default payments, and insufficient credit history are red flags for any creditor. Although some creditors do provide funding to borrowers with bad credit, having a good credit score allows you to get the best terms and rates.
4. Avoid Delinquencies
Delinquencies affect your credit score and trustworthiness as a borrower. If you have past delinquencies, underwriters may think twice before giving you an approval. Remember that the main goal of any funding company is to get repaid with interest to make profit.
Failure to pay financial obligations to your creditors can negatively impact your borrowing power in the future. As a business owner, it is crucial to keep your financing options favorable in case the need arises. With that in mind, always pay your creditors on time without fail.
5. Take Advantage of Using a Merchant Account
Having a merchant account allows you to pay a funding company in two ways. First, the company can collect merchant cash advance payments through an Automated Clearing House (ACH).
This allows the creditor to collect repayments by automatically deducting a set amount from your merchant bank account every business day. This is the most common form of funding for repayments.
Another way is through credit card processing by way of a merchant cash advance split.
This type of cash advance allows the creditor to get repaid by splitting your credit card sales. Instead of deducting a set amount of cash from your bank account, the creditor gets repaid a percentage of about 5-20% of every credit card sale you make until the balance is fully paid.
6. Opt for Weekly Payments
Most merchant cash advances are structured to be paid daily.
However, there are possible payment schedules that you can request from your creditor. Although it is not common, some creditors may agree to be repaid on a weekly basis. Instead of straining your daily cash flow, ask your potential creditor if a weekly payment schedule is possible.
Requesting for weekly payments may require certain requirements to be met so make sure that you do have a great credit score to begin with. In addition, shop around for other funding companies to see who offers weekly payments.
7. Pay Your Cash Advances Early
A merchant cash advance is not technically a loan, but you can still save money by paying off the advance earlier. Ask the funding company if they do offer discounts for early repayment. Some companies offer around 5-25% discount on early-payoffs depending on how much is left of the balance.
Although you may not need to pay off the balance at an early stage, it may provide some hefty savings. If your merchant sales have improved during the duration of your advance, it may be a sound decision to get those savings through an early-payoff. This may also improve your chances of getting better advance terms and rates in the future.
8. Shop Around for the Best Terms and Rates
Do not get stuck on just one funding company. There are literally dozens of other options for you to consider. Keep in mind that cash advance companies vary in terms, rates, and fees. Getting your cash advance from the right company can potentially save you as much as 20-30%.
The truth is, the sheer number of advance companies available online can be staggering. If you are having trouble choosing the right company to help secure financing for your business, then you may need professional assistance.
Every business owner should have a good grasp on financing. Do you want to learn more about merchant cash advances and business tips from Ali Habib Mayar? Follow his blog at alihabibmayar.com to get started.