Required Documentation for Small Business Merchant Loans

You've decided to pursue a merchant cash advance for your business. You've crunched the numbers, weighed your options, and determined that quick capital is worth the premium. Now comes the part of the equation that has most business owners letting out a collective groan: gathering documentation.

Good news-the paperwork involved in a merchant cash advance is significantly less than that required by traditional bank loans. No three-inch binders full of financial statements, no exhaustive business plans, and no collateral appraisals. But you will need to be able to show that your business is real, operational, and generating revenue. Let's demystify what exactly the lenders want to see, and how to prepare your application for the fastest approval.

The Core Documents: What Every Lender Requests

Consider merchant loan documentation as telling a rather simple story: your business exists, generates money, and can afford repayment. Most providers need three essential categories of proof.

• Bank statements are at the heart of any application. The usual demand from lenders is three to six months of business bank statements, but some may ask for as many as twelve months in larger advances. Through these, your revenue patterns, expenses, debts owed, and cash flow health will be detected. They are your business's financial diary.
• Before you submit, review your statements with a lender's eye: They want consistent deposits, manageable expenses, and positive account balances. Red flags include repeated overdrafts, returned payments, or unexplained large withdrawals. If problems arise in your statements, solve them before applying, or be ready to explain them candidly.
• Credit card processing statements prove your sales volume, which is especially crucial when your repayment structure is pegged to your daily card transactions. Providers want to see three to six months of these statements from your merchant processor, be it Square, Stripe, Clover, or traditional processors like First Data.
• These should reflect your gross sales, number of transactions, average ticket sizes, and chargebacks. A consistent or increasing transaction volume indicates a healthy business. Highly erratic sales or excessive chargebacks could be a cause for alarm.
• Business identification documents prove that you are a legitimate operation. This would include your Employer Identification Number, or EIN, business license, articles of incorporation, or LLC formation documents, and a voided business check. Some lenders also require personal identification such as your driver's license or passport.

The Supporting Cast: Additional Documents Lenders May Request

Some providers go beyond the basic level, depending on your business type, loan amount, or risk profile.

• Tax returns are not always necessary for merchant advances, but if a business is well established with solid returns, then such businesses should provide them. One or two years of business tax returns can further strengthen your application and can get you terms that are better. If your returns show losses but your recent bank statements demonstrate revenue improvement, both documents together tell a story of growth.
• Outstanding debt disclosures let them know your current financial obligations. Lenders want to know if you're currently servicing other merchant advances, business loans, or liens. Honesty counts here, as they are going to find these obligations when reviewing your bank statements anyway. Undisclosed debts tank applications much quicker than disclosed ones.
• Business plan or purpose letter. This occasionally shows up on application forms, especially for newer businesses or unusual funding requests. A brief explanation, "We're purchasing inventory for the holiday season" or "Upgrading our kitchen equipment", helps the lender understand your needs and evaluate repayment likelihood.

Special Situations: Industry-specific Requirements

Higher risk industries are under even closer scrutiny. Expect more forms of documentation, potentially fewer willing lenders if you fall into high-risk fields like cannabis-related businesses, adult entertainment, and/or cryptocurrency.

This might include health permits and lease agreements for restaurants and food service businesses, or online sales platform statements from Shopify, Amazon, or other marketplaces for e-commerce businesses. Licensing and insurance documentation may be required for home service businesses, such as those that operate as contractors.

Preparing Your Documentation: Pro Tips

Smart prep speeds up approval. Go digital before you apply. Set up a folder with clearly named PDFs:

• Make sure your bank statements are complete: all pages, no redactions, except, perhaps, for personal transactions, if you use one account for both business and personal expenses. Though it is always best practice to separate these. Missing pages or heavy redactions signal you're hiding something, even if you're not.
• If your statements show something out of the ordinary, such as a large one-time deposit from selling equipment, a gap in revenue during renovation, or seasonal fluctuations, write a brief explanation. Proactive transparency engenders trust.
• Review everything for consistency. Your business name should be identical on all documents. Mismatches between your LLC name, DBA name, and bank account name create mix-ups and delays.

The Digital Advantage

• Most merchant advance providers function purely online with digital applications. You upload documents either through secure portals or by emailing encrypted files. This speed is part of the appeal-no scheduling bank appointments or waiting for faxed confirmations.
• But digital doesn't translate into careless. Blurry phone photos of documents are rejected. Use scanning applications or real scanners for clear, readable documents. Make sure all four corners are visible in every page and text is readable.

The Bottom Line

Required documentation for merchant loans is not onerous, particularly by comparison with traditional financing. The whole package might take an hour or two to compile, if your records are reasonably organized. Most lenders need proof of three simple facts: you operate a legitimate business, you generate revenue and you can handle repayment.

The largest or even most profitable businesses are not the ones getting the fastest approvals for the best terms; they are simply the best prepared. The documentation process should be treated as your first impression: submitted complete, organized, clear documentation, and you are already ahead of most applicants.