To become an effective Merchant Cash Advance (MCA) chaser, which typically refers to someone

working in the sales, lead generation, or collections side of the MCA industry, you'll need to have a
solid understanding of how MCA works, the sales process, and how to manage customer
relationships effectively. Here's a breakdown of key areas you should focus on:

1. Understanding Merchant Cash Advance (MCA) Basics

• What is MCA?
A Merchant Cash Advance is a financing option where businesses receive a lump sum
payment in exchange for a percentage of their daily credit card sales or a fixed daily ACH
(Automated Clearing House) withdrawal from their bank accounts.

• How MCA works:

Learn about the process and terms of MCA deals:

o Factor Rate: MCA companies charge a factor rate (not an interest rate) that
determines the total repayment amount.

(Total Repayment=10,000×1.3=13,000)

o Repayment Structure: Repayment is typically based on a percentage of daily sales

(or fixed withdrawals).

o Risk vs. Benefit: MCA is an alternative to traditional loans, but with higher fees and
no fixed term, so understanding how businesses manage the risks and benefits of
this option is critical.

• Industry Terminology: Familiarize yourself with terms like:

o Factor rate

o Holdback percentage

o Advance amount

o Repayment period

o Underwriting guidelines

o Decline rate

2. Sales & Lead Generation in MCA

• Identifying Potential Clients:

o Target small to medium-sized businesses that rely on credit card sales (e.g.,
restaurants, retail shops, service providers).

o Understand what makes a business eligible for MCA (e.g., consistent daily sales,
good cash flow).

• Building Relationships:
 o Understand that MCA is often seen as a short-term cash flow solution, so
businesses are looking for trust and reliability in their funding partners.

o Develop a strong communication strategy, addressing both the advantages and

risks of MCA clearly.

• Understanding Client Needs:

o Many businesses seek MCA because they may not qualify for traditional bank loans.
Assess their financial health to determine if MCA is a good fit.

o Position MCA as a quick funding solution but be honest about the costs and
potential drawbacks.

• Cold Calling & Networking:

o Work on your cold calling scripts and techniques.

o Attend networking events and conferences relevant to small businesses, such as

Chamber of Commerce events or industry-specific trade shows.

3. The Application and Approval Process

• Documentation:
Understand the documents typically required to apply for an MCA:

o Business bank statements (usually 3 to 6 months)

o Recent credit card processing statements (if applicable)

o Tax returns (some providers may require these)

o Business identification (e.g., EIN, LLC documentation)

o Proof of ownership

• Underwriting Process:
Learn the factors that underwriting teams consider:

o Business cash flow: MCA lenders look at daily or monthly credit card sales to
assess repayment ability.

o Creditworthiness: While MCA lenders don’t rely heavily on credit scores, having a
basic understanding of how they evaluate businesses will help in targeting the right
leads.

o Risk assessment: Lenders will consider industry risks, the business's financial
health, and their sales trends.

4. Understanding the Terms and Fees

 • Factor Rate: This is the key pricing mechanism in MCA. The factor rate is a multiplier that
determines the total amount to be repaid. For example, if a business receives an advance of
$10,000 and the factor rate is 1.3, the total repayment amount would be $13,000.

• Repayment Methods:

o Daily percentage: A fixed percentage of daily sales is deducted.

o ACH Withdrawal: A fixed daily withdrawal from the business’s bank account.

• Transparency and Ethics: Be transparent about all fees and terms upfront to ensure
businesses know what they’re agreeing to. It’s important to foster trust and avoid practices
that could lead to misunderstandings or reputational damage.

5. Managing Relationships and Customer Expectations

• Setting Realistic Expectations:

o Be clear about how much money a business can expect to receive.

o Set realistic expectations regarding repayment schedules.

• Customer Service:

o Maintain ongoing communication with clients to ensure smooth repayment and

resolve any issues.

o Help clients understand how their repayments work and when they can expect the
loan to be paid off.

o Some MCAs may require customers to adjust their repayment schedules based on
fluctuating sales, so maintaining a good relationship is key.

• Addressing Customer Concerns:

o Many clients may be hesitant about the higher cost of an MCA versus traditional
loans. Be prepared to explain the flexibility and speed of the process.

o Be empathetic to the financial challenges small businesses face and offer solutions
that fit their cash flow.

6. Collections & Recoveries (If you're in a collections role)

• Payment Collection Strategies:

o For MCAs, collections often happen through daily deductions from the business’s
account or through credit card sales. Ensure the business understands the
repayment mechanism.

• Dealing with Non-Payment:

o Understand the consequences for businesses that fail to repay (e.g., damage to
credit, legal consequences).
 o Approach late payments diplomatically but assertively. It's crucial to maintain
professionalism, even when businesses are struggling to pay.

o Know the options for restructuring deals or extending repayment terms if necessary.

• Legal & Regulatory Compliance:

o MCA agreements are not governed by the same regulations as traditional loans, but
be aware of state and federal guidelines.

o Understand any relevant lending laws, including those regarding consumer

protection and lending practices, to ensure compliance in your sales and
collections efforts.

7. Marketing MCA to Businesses

• Direct Outreach & Advertising:

o Run ads on digital platforms (Google, Facebook) targeting small businesses needing
quick capital.

o Send email campaigns or direct mail brochures explaining MCA options.

• Online Presence & Referrals:

o Establish an online presence that builds trust. Have a website or social media
profiles that businesses can check out for more information.

o Use testimonials or case studies from satisfied customers to build credibility.

8. Monitoring Market Trends

• Economic Factors:

o Keep an eye on broader economic conditions that may affect small businesses,
such as interest rates, inflation, or market recessions. Understanding these factors
will help you better predict client behavior.

• Competitors & Alternatives:

o Stay updated on what other MCA providers or traditional lenders are offering.

o Understand how to position MCA against alternative financing options like

traditional business loans, invoice factoring, or business lines of credit.

Additional Tips for Success:

• Ethics and Transparency: Ethical behavior is crucial in the MCA industry. Be upfront with
potential clients about all the costs and terms of the advance.

• Be Persistent: The MCA sales process can be long and competitive. Persistence, without
being pushy, will help build trust and close more deals.
 • Stay Educated: The MCA landscape evolves, so stay updated on industry regulations, new
technologies (like AI underwriting), and trends in the small business space.

• Networking: Build strong relationships with small business owners and other financial
professionals, as they can refer clients to you.

By understanding how MCA works and developing the right skills in sales, customer service, and
relationship management, you'll be able to succeed as an MCA chaser, whether you're involved in
lead generation, sales, or collections.

Email Writing

Subject: Request for Additional Documentation for MCA Processing

Dear [Recipient's Name],

I hope this email finds you well. I’m writing to follow up on the documentation required for the
processing of your Merchant Cash Advance application. To move forward with the next steps, we
kindly request the following documents:

1. [List of required documents, e.g., bank statements for the last 3 months]

2. [Any other relevant documents, e.g., business tax returns, proof of ownership, etc.]

Please provide these documents at your earliest convenience so we can ensure timely processing
and avoid any delays. If you have already submitted these documents, kindly let us know, and we
will double-check to ensure they are on file.

If you have any questions or need assistance with gathering the requested materials, please don’t
hesitate to reach out. We're happy to help.

Thank you for your prompt attention to this matter. We look forward to moving ahead with your
application.

Best regards,
[Your Full Name]
[Your Job Title]
[Company Name]
[Contact Information]
 Underwriting Process

When underwriting a Merchant Cash Advance (MCA), lenders assess various factors to
determine whether to approve the advance, how much to offer, and what terms to set. MCA
underwriting differs from traditional loan underwriting because it is based on a business's
future sales and cash flow rather than creditworthiness or assets. Here's a breakdown of the
key factors you need to know for MCA underwriting:

1. Business Revenue (Sales Volume)

• Why it's important: The primary basis for MCA underwriting is the business’s daily,
weekly, or monthly revenue (often focused on credit card sales for many businesses).
Lenders need to ensure the business has a sufficient and predictable stream of income
to repay the advance.

• What lenders look for: Lenders typically require a minimum amount of monthly
revenue, often ranging from $5,000 to $20,000. Businesses with higher revenue are
seen as less risky because they can generate more funds for repayment.

• Documentation: Lenders typically ask for bank statements, merchant processing

statements (for credit card-based sales), or tax returns to verify revenue.

2. Business Stability and Age

• Why it's important: Lenders want to ensure the business is stable and likely to
continue generating consistent sales. Younger businesses with unstable cash flow
pose a higher risk.

• What lenders look for: A business should typically be in operation for at least 6 to 12
months before qualifying for an MCA, though some lenders might be more flexible.

• Documentation: Lenders will often ask for a business registration or incorporation

documents to verify the length of operation.

3. Industry Type

• Why it's important: Certain industries are considered riskier than others. For example,
restaurants, retail, and hospitality might be considered riskier than other sectors like
healthcare or professional services.

• What lenders look for: The lender will assess whether the business operates in an
industry with stable or volatile sales. High-risk industries (e.g., construction,
entertainment) may face higher interest rates or more stringent terms.

4. Cash Flow Consistency

 • Why it's important: MCA lenders want to see stable cash flow to ensure that payments
will be made consistently. Irregular or declining cash flow makes repayment riskier for
the lender.

• What lenders look for: Consistent sales over the past 3–6 months are ideal, as lenders
assess seasonal trends and fluctuations. Sudden drops in revenue or sporadic cash
flow may raise concerns.

• Documentation: Lenders typically request bank statements or merchant processing

records to evaluate cash flow.

5. Factor Rate and Total Payback

• Why it's important: The factor rate is a key metric in MCA underwriting and determines
how much the business will ultimately pay back. It typically ranges from 1.1 to 1.5
(meaning the business repays 1.1x to 1.5x the amount borrowed).

• What lenders look for: The factor rate is calculated based on the perceived risk of the
borrower and the urgency of the business’s need for funds. Higher-risk borrowers may
be offered higher factor rates, resulting in a higher total repayment.

• Example: If a business borrows $50,000 with a factor rate of 1.3, the total repayment
would be $65,000 (50,000 × 1.3).

6. Holdback Percentage

• Why it's important: The holdback percentage determines how much of the business’s
daily or weekly revenue is deducted to repay the MCA. This percentage is typically
between 5% to 20% of daily sales.

• What lenders look for: A higher holdback percentage gives the lender more assurance
of repayment, but it may be harder for the business to manage cash flow if the
percentage is too high.

• Example: If the holdback percentage is 10% and the business generates $1,000 in daily
sales, $100 will be deducted daily until the loan is paid off.

7. Credit Card Processing and Payment History

• Why it's important: Many MCAs are secured against future credit card sales, so lenders
heavily scrutinize a business's payment processing history.

• What lenders look for: A clean history of credit card processing without chargebacks,
refunds, or merchant account issues is critical. Lenders may also look at the average
ticket size (value of individual sales) and the volume of transactions.

• Documentation: Merchant account statements showing credit card processing activity

will often be requested. Lenders will also want to see if the business has a history of
chargebacks or returned payments.

8. Personal Guarantees (PG)

 • Why it's important: While an MCA is typically unsecured, some lenders may require a
personal guarantee from the business owner. This ensures that the business owner is
personally responsible for repayment if the business fails to meet its obligations.

• What lenders look for: Personal guarantees can provide additional security for the
lender. However, for businesses with strong financials and stable revenue, the
requirement for a personal guarantee may be waived or less stringent.

9. Existing Debt

• Why it's important: If a business already has outstanding debt (especially high-interest
loans), the MCA lender will need to assess whether the business can handle additional
obligations.

• What lenders look for: Lenders typically want to ensure that the business is not over-
leveraged. If the business is already repaying other MCAs or loans, the lender might
lower the advance amount, increase the holdback percentage, or require additional
collateral.

• Documentation: Lenders may request a list of current debts and monthly obligations to
assess the overall financial burden on the business.

10. Bankruptcies or Legal Issues

• Why it's important: Businesses that have filed for bankruptcy or are involved in legal
disputes may be considered high-risk for lenders.

• What lenders look for: Any history of bankruptcy, liens, or lawsuits may indicate that
the business is a higher risk for repayment.

• Documentation: Lenders may request legal documents or bankruptcy filings to assess

the extent of financial or legal problems.

11. Business Location

• Why it's important: Some lenders may consider the geographical location of the
business to assess market risk. Certain regions may have economic downturns or
other factors that impact business performance.

• What lenders look for: Businesses located in economically stable areas with good
growth potential may be favored. Lenders may avoid certain areas if they have a history
of economic volatility or natural disasters.

12. Repayment Structure and Duration

• Why it's important: MCA lenders need to understand the timeline over which the
business plans to repay the advance.

• What lenders look for: MCA repayments are often structured as daily or weekly
deductions from the business’s revenue, but some lenders may offer flexible
 repayment terms based on business needs. Typically, repayment periods range from 3
to 18 months, depending on the size of the advance.

Additional Considerations:

• Documentation: Lenders may require the following documents for underwriting:

o Recent bank statements (3–6 months)

o Merchant processing statements (for credit card sales)

o Tax returns (for the past 1–2 years)

o Financial statements (income statement, balance sheet)

o Personal guarantees (if applicable)

• Underwriting Process: MCA underwriting is typically faster than traditional loans, often
taking just a few days to complete. The process is usually more flexible, and lenders
rely heavily on cash flow rather than credit scores.

Conclusion:

MCA underwriting is more focused on a business’s cash flow, revenue stability, and sales
potential rather than credit scores or assets. Lenders look for a strong, consistent sales
history, the ability to generate predictable revenue, and a clear path to repayment. By
understanding these key factors, businesses can better prepare themselves to apply for an
MCA and increase their chances of approval.