Who Qualifies For a Merchant Credit Card Cash Advance?

Among the other important factors to be considered when applying for a merchant credit card cash advance, one must consider the average size of each transaction of his or her company. One might ask him or herself why this is of any importance at all to the funding source making the advance. The answer is actually a fairly commonsensical one.

To illustrate the significance of this data, let us use two examples, both of which are seeking a merchant credit card cash advance of $20,000.


The first example shall be that of a local diner. Let us suppose that said restaurant averages $20,000 per month in credit card sales. We have all been to diners, so let us assume that the average cost of a meal paid for by credit card is $30.00. This means that in a given month, to maintain the level of $20,000 in sales, the diner would have to serve 667 meals at the average cost of $30.00. Achieving that amount of turnover and sales would seem to be quite a daunting task.


For the purposes of this discussion, let us say that the second business is a high-end furniture store. This store, which sells custom made pieces, averages $80,000 per month in credit card sales. The furniture is sold in sets, however, so the average cost per transaction is $8,000. As you can guess, this means that the store would have to make only 10 average sales to maintain its monthly average of $80,000 in credit card transaction.


As we have discussed in previous posts, the advances are repaid to the funding source on a per-transaction basis. This means that the funding source will hold back a percentage of each transaction - anywhere from 8% to 25% - until the advance is repaid. Common sense would seem to dictate that it would be easier for the high-end furniture store to make 10 sales than it would be for the diner to make 667. Therefore, the furniture store is the apparently obvious answer.

But we must delve further to better understand who the more qualified candidate for a merchant credit card cash advance is.

While the diner has to do more volume, the relatively small size of the sales makes it impossible for any one, two, or even fifty to materially affect the income of the restaurant. This is not the case with the furniture store. A decrease by only 5 sales would cut the income of the store in half, affecting its ability to repay the advance. Now, while funding sources understand and account for the fact that some months are slower than others - resulting in less being repaid in those months - they like to hedge as much as possible.

Thus, in the end, the diner is the better candidate for a merchant credit card cash advance than the high end furniture store. This is not to say that the store would be summarily rejected for an advance, but it would certainly be more of a challenge to find a source. So if you are considering a merchant credit card cash advance, understand that smaller ticket items sold in greater volume are looked upon more favorably than higher ticket items sold as in lower volume.