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Delancey Street is a premier,  and top rated, merchant cash advance company. If you are looking into getting an MCA for your business we can help. We provide the best rates, best service, and best terms, for merchant cash advances across the USA.

If you’re thinking about getting an MCA, then you need to know about factor rate. This is a huge thing. In this article, we’ll talk to you about the following things.

  • How does a merchant cash advance factor rate work
  • How to understand your mca factor rate
  • How lenders determine your mca factor rate

This article is really focused on trying to educate you about merchant cash advance factor rates, and why it’s confusing. The factor rate is expressed not in %, but as a decimal point. They range from 1.1 to 1.5 – which determines how much you’ll pay back on your loan. There’s a lot of factors that go into a merchant cash advance factor rate, and it’s my goal to educate you in this article.

How does a merchant cash advance factor rate work
If you have a small business and you need short term funding, then a merchant cash advance is a great tool. It can give you quick working capital, fast. It’s essentially a cash advance that is paid back using your daily sales. You’re probably learning more about an MCA at the same time as learning about business loans, lines of credit, etc. Typically, with an MCA, the factor rate will be anywhere from 1.1 to 1.5, depending on your industry, # of years in business, stability of sales, average

How to understand your factor rate
If you’re given a factor rate for your business, you’ll wonder how it was derived.  Factor rate greatly impacts the final amount you pay back.
If you get an advance of $10,000 at a rate of 1.35 for 12 months, then you’ll have to pay back $13,500. You might think that’s great! The interest is 35% of the advance. When a factor is charged though, all of the interested is charged to the principal when the loan is originated. That’s the main difference between you need to know when understanding factor rates and interest rates. APR is used in financing where interested accrues on the principal amount, as the principal gets smaller, and smaller, and more payments are made.
There’s a lot of things to consider when getting an MCA – primarily, the fact they are paid back daily/weekly. If you have a strong sales day, then you’ll pay more that day.

How your factor rate is determined
Below are somethings companies look at when determining your factor rate.
CC Processing Statements: The MCA company will want to see you have a history of credit card sales. That means 3 months of statements.
Business Bank Statements: The lender wants to verify your business’ health.
Years of Business: Most lenders won’t lend you funds unless you’ve been in business for a while.
Tax returns: Some MCA companies will want to see your tax returns to get an idea of your business and how it’s growing.

Be prepared for your business loan application 

  • Prepare personal and business background information.
  • Provide legal documents such as leases or franchise agreements.
  • Be ready to answer questions about the loan purpose.

Preparation is key for small-business owners who are considering applying for a small-business loan. Before you jump into the fray of small business loan applications, take the time to gather the documentation you need and review the requirements you must meet to qualify for a small business loan.

Documentation checklist

One small business loan lender is the U.S. Small Business Administration (SBA), which is a government agency that provides support to small-business owners. But even the SBA notes that it’s not the only game in town. In addition to traditional commercial lenders, small-business loans are also available from state and local economic development agencies and nonprofit organizations, often at low interest rates.

The SBA recommends that business owners have the following documentation before they apply for a loan:

  • Personal background. This includes information as previous addresses, names used, criminal record, educational background, etc.
  • Resumes. Some lenders require evidence of management or business experience, according to the SBA.
  • Business plan. All loan programs require a sound business plan to be submitted with the loan application, the SBA states. It should include a complete set of projected financial statements, including profit and loss, cash flow and a balance sheet.
  • Personal credit report. You should obtain a credit report from all three consumer credit rating agencies before submitting a loan application the lender to check for inaccuracies that might be negatively impacting your credit score, according to the SBA.
  • Business credit report. If you’re already in business, you should submit a credit report for your business. Be sure to review the report before beginning the application process.
  • Income tax returns. You’ll likely be required to submit both personal and business income tax returns for the past three years.
  • Financial statements. The lender may require owners with more than a 20 percent stake in the business to submit signed personal financial statements, or to provide projected financial statements as part of your business plan.
  • Bank statements. You may be required to submit one year of personal and business bank statements.
  • Collateral. Some loan programs require collateral, while others do not. Consider preparing a collateral document describing the cost and value of personal or business property that could be used to secure a loan.
  • Legal documents. You may be required to submit legal documents, including: Business licenses or registrations; articles of incorporation; copies of contracts with third parties; franchise agreements; commercial leases.

Questions for you

During the application process, your lender might have questions for you. According to the SBA, these are common questions you should have answers for before you begin the loan application process:

  • Why are you applying for the loan?
  • How will you use the loan proceeds?
  • What assets need to be purchased, and who are your suppliers?
  • What other business debt do you have, and who are your creditors?
  • Who are the members of your management team?

By taking the time to prepare before applying for a small-business loan, you increase your chances of success. Gather the documents you need, review the information you must provide, and walk into the application process with confidence.


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Our team is available always to help you. Regardless of whether you need advice, or just want to run a scenario by us. We take pride in the fact our team loves working with our clients - and truly cares about their financial and mental wellbeing.

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