Are Startups Eligible For Fast MCA Approval Estimates?

You started your dream business just three months ago. Doors are opening, people are coming in and sales are being made, but you’re still stuck in that scary startup phase where every dollar counts and cash flow feels like a high-wire act. Now you need money to build on early traction, perhaps hiring another employee or expanding inventory. You’ve heard all about the lightening fast approvals on Merchant Cash Advances. But there’s one question still nagging at you that I haven’t already covered. Do those speed promises really hold true for startups, or just for existing businesses?

The Unsurprising Reality Behind Startups and MCAs

Let’s be honest: the world of MCA has a complex relationship with startups.

Although merchant cash advance companies happily promote their speed and ease, they all have a big dirty secret: They much prefer working with businesses that have been open for at least 6 months (in some cases a year). Why? For one, MCA’s relies on your sales history fundamentally, and if you opened your doors eight weeks ago, there’s just not enough history to measure.

Consider it from the lenders’ point of view. They’re lending you money based on the amount of sales they expect you to make in the next short term, and they’re going to skim a slice off the top for themselves. With only two months of sales history, how can they guarantee how well you’ll do in the next six months? That huge hit you landed over the summer may be DOA by the time October rolls around.

When "Startup" Becomes "Eligible"

Here’s the kicker: Not all startups are equal to MCA providers. The magic number for most lenders is three to six months of business history and a regular stream of credit card transactions. Meet this criteria, and you no longer have the "startup" stamp, you have an "early stage business" with revenues, and this is a whole different ball of play.

However, if your credit card businesses are bringing in approximately 8,000 to 10,000 dollars each month, and you have maintained that level of business for four or five months, most providers of MCA services will gladly extend their services to you. While your approval status may not come through in 24 hours to someone with spotless credit patterns like a five-year-old, that's about it, that's in the game. Typically, it may take 24-48 hours to process your application.

Revenue Requirements Become More Stringent

Even if you qualify, the competition will be raised even further. “A healthy restaurant with $30,000 a month in sales could get a 550 score with little scrutiny,” says Andrews. “However, you with a three-month old coffee shop with an identical volume of sales can anticipate much closer scrutiny from lenders.” They may require a higher tier of minimum levels, such as $12,000-$15,000 monthly, versus a standard $5,000-$10,000 level. 

Typically, an initial loan of a lower amount is granted so that lenders can gauge the situation before advancing further funds. Having a good personal credit score is even more important. Even if an established company has a 500+ rating, this might work. However, this would not help a brand-new company. This startup would have to have at least 600+ so as to compensate for lack of business history. This would help demonstrate in some small way that this startup is a good risk.

Industry Makes All The Difference

Some startups fly by smoothly, while for others, everything crashes into the wall. An easy one, a new restaurant, store, or salon with strong revenue? Most MCA lenders can’t get enough, if they know what you want, they leap at the chance. An entirely new tech store, consulting company, or service business with unpredictable revenue? Much harder to finance, even with decent revenue, because the money flow is difficult to predict.

Bottom Line for New Businesses

Can startups attain quick approval of MCA estimations? Absolutely, but with some huge conditions. You will require at least three to six months of business history, regular credit card processing volume meeting or exceeding the minimum requirements, and a business model that is recognized and trusted by the MCA. If you meet these requirements, you will be approved within 24 to 48 hours, and this is considered incredibly rapid compared to other options for new businesses.

Reality check: you just opened, so you’re probably looking at another few months before MCA business doors swing wide. However, if you’re close to reaching that six-month mark with good sales, then those rapid approvals you’re hearing so much about will be within your sights.