|All content presented here and elsewhere is solely intended for informational purposes only. The reader is required to seek professional counsel before beginning any legal or financial endeavor.|
Selling a merchant cash advance (MCA) is a great way to help business owners and entrepreneurs get quick access to capital when they need it most. MCAs can help businesses get capital with lower interest rates and free up capital for other business purposes. As an MCA seller, you want to make sure you can maximize your profits and get the best possible ROI from selling an MCA. Knowing the ins and outs of selling an MCA is key to success.
- A merchant cash advance is a flexible, fast, and convenient way for businesses to access capital.
- When selling MCAs, it’s important to be knowledgeable about the product and focus on the advantages for the customer.
- Being familiar with the market and the customer's needs is essential to crafting an effective sales pitch.
- Doing research, understanding what the customer wants, and being prepared to address their concerns can help ensure a successful sale of an MCA.
1. Have an In-Depth Understanding of the MCA Market
Having an in-depth understanding of the merchant cash advance market is essential for loan brokers looking to sell an MCA. Being educated and well-informed is key to providing the best advice to customers.
What Is a Merchant Cash Advance?
An MCA is a financial product offered by some lenders to business owners where an advance is either given as a lump sum or as a line of credit based on future sales. This product is a way for business owners to acquire working capital quickly as it doesn’t require any collateral and typically has a much quicker approval process compared to traditional financing. The amount of the advance is typically based on the business owner’s expected credit card sales and is repaid with a percentage of those sales.
How Does a Merchant Cash Advance Work?
A merchant cash advance is a business financing option that provides working capital in exchange for a percentage of future credit and debit card receipts. This type of financing is generally given as a lump sum that is repaid as a percentage of future credit and debit card sales. Generally, the process will go something like this:
- The merchant applies for a cash advance and provides the lender with information on their credit card sales over the last few months.
- Based on the provided information, the lender will provide a quote as to how much money they’re able to offer.
- When approved, the merchant will receive a lump sum that is to be repaid via a percentage of their future credit and debit card receipts.
- The merchant will have to make a daily, weekly, or monthly repayment that is a predetermined percentage of their credit and debit card receipts.
- The lender will be paid back the agreed amount from the merchant’s credit and debit card sales until the full amount and interest have been paid off.
What Are the Benefits of a Merchant Cash Advance?
Introducing an MCA to a business can be hugely beneficial. These advances provide a quick and easy solution to access additional funding with minimal paperwork and a streamlined application process. Here are some of the main benefits of a merchant cash advance:
- Fast and easy financing. MCAs are incredibly fast and easy to apply for compared to other loan products. You can get approved and receive funds in a very short period of time, enabling you to access funds quickly without any lengthy paperwork or drawn-out application process.
- Flexible and easy to access. MCAs are incredibly flexible, enabling you to tailor repayment schedules to suit your specific business needs. This allows you to spread out the repayment and take back control of cash flow when you need it most.
- No personal guarantee required. With an MCA, there is no need for you to put up any personal assets or take out a personal guarantee. This enables you to protect your personal assets and keep your business activities separate.
- No collateral necessary. An MCA does not require you to put up any collateral to secure the loan, allowing you to preserve personal and corporate assets.
What Are the Drawbacks of a Merchant Cash Advance?
The potential financial benefits of an MCA can be significant, but it is important to consider any drawbacks of the product before suggesting it as an option to clients. Here are some of the key drawbacks of an MCA:
- High fees. In exchange for more lenient requirements, an MCA comes with costs in the form of high fees and interest rates, making it an expensive financing option.
- Unpredictable repayments. MCA repayments are based on your business's monthly card takings, meaning that it can be difficult to predict a repayment schedule.
- Must have credit and debit card sales. Since MCAs are based on future card sales, businesses have to have a certain amount in credit and debit sales to qualify.
2. Network and Market Your MCA-Selling Services
If you want to sell merchant cash advances, you need to have an effective marketing plan. Start by building a strong brand and developing a marketing strategy that clearly communicates the benefits of your MCA-selling services.
Your marketing strategy should include tactics such as:
- Attending industry expos.
- Participating in relevant webinars.
- Exhibiting at trade shows.
- Identifying and building relationships with influencers in the industry.
Networking should also be a key component of your marketing strategy. Assemble a list of potential clients, join online forums and groups, and attend conferences to network and make contacts. Developing relationships with small businesses, local business owners, and financial institutions can be a great way to build your business.
3. Identify Companies that Need a Merchant Cash Advance
When selling a merchant cash advance, it’s essential to identify companies that need an MCA, so that you can target your services toward those companies. Generally, businesses that need an MCA are looking for a way to quickly access a lump-sum of cash that they can use to finance their operations or purchase goods and services.
By targeting the right customers and businesses, you’ll be able to provide the right product, with the best terms, for the specific needs of that customer. Trying to sell MCAs to everyone might either result in you offering the wrong type of product for the customer’s needs, or you may not be able to reach the customer if you can’t effectively target your marketing message.
Additionally, since merchant cash advance loans carry higher fees than traditional loans, they often may not be the best financial solution for a business. Don’t just consider your needs, prioritize the needs of your customers as well.
Why Would a Merchant Need a Cash Advance?
Many small business owners need short-term working capital at some point, and a merchant cash advance can be a viable option. Business owners may need a cash advance for a variety of reasons, including:
- To expand operations.
- Renovate their business location.
- Cover day-to-day expenses during periods of slow business.
- Pay for new equipment.
What Types of Businesses Are a Good Fit for an MCA?
Businesses that are a good fit for a merchant cash advance are those that have a high volume of credit card sales, such as restaurants and retail stores. Businesses that have a regular and consistent influx of cash flow also make for a good match for an MCA.
Other types of businesses that could benefit from an MCA include service-based businesses such as auto repair shops, salons, spas, and landscaping companies. Businesses that don’t have a steady stream of cash flow and are unable to project future sales, such as restaurants relying on seasonal business or those in a struggling industry, may not be the best match for an MCA.
How Do You Find Companies That Need Cash Advances?
When searching for companies that need an MCA, it’s important to focus your energy on businesses that are likely to need a quick infusion of cash to stabilize their operations or make a specific purchase. Businesses experiencing rapid growth or ones that are seasonal may be the most likely candidates for a cash advance. You can also look for companies that have a steady stream of customers but lack access to traditional financing to meet their growth needs.
Start by networking and connecting with business owners in your community, both online and offline. You can reach out to local business owners and industry associations/funds to learn more about the companies and what they need funding for. Additionally, you can also use social media platforms like LinkedIn and Facebook to connect with them directly and offer your services. You can also search online directories and job boards to find companies in specific industries that may be looking for financing.
4. Change Your Script to Match the Circumstances
When selling a merchant cash advance, it's important to remember that each transaction is unique. Therefore, it’s essential to adjust your sales pitch accordingly. By tailoring the script to the individual needs and circumstances of the customer, you can more effectively show them the value of your product. Make sure you:
- Do your research beforehand. Learn about the customer's business, their industry, and their current financial state. The more you know, the better you can shape your sales pitch to their individual needs.
- Emphasize the immediacy of the merchant cash advance and how it can help the customer right away. Talk about how it will free up cash flow, reduce costs, and optimize their profits.
- Tailor your calls. Be sure to include the customer’s unique circumstances in your talking points to create a personalized experience.
By customizing your script to the customer’s specific situation, you can better demonstrate the value of the merchant cash advance and increase the likelihood of making a sale.
How Do You Present the Cash Advance to Merchants?
When presenting a merchant cash advance to potential customers, it’s important to focus on the benefits that the cash advance offers. Explain the features of the cash advance and how it will help the business grow and succeed. Make sure to stress the flexibility and convenience that the merchant cash advance offers. Focus on how the cash advance can help improve their cash flow and provide them with working capital for short-term needs.
Additionally, explain the process for taking out the cash advance and how easy and fast it can be to get the funds. Show the customer that the merchant cash advance is a secure and reliable way to get the money they need.
5. Have a Reliable Sales Process in Place
A reliable sales process ensures that your buyers will have a consistent and positive experience when they purchase a merchant cash advance from you. In order to create a reliable sales process, consider mapping out your sales process beforehand. This should include:
- A clear explanation of what an MCA is and why it’s a good product.
- Details on the documents you’ll need to collect from potential buyers.
- Information on the verifications needed to properly authorize an MCA and the timeline for processing a sale.
Having a reliable sales process in place can ensure that the sales process is consistent across all of your buyers. Additionally, it can provide buyers with confidence that their purchase will be properly authorized. A reliable sales process can also reduce the amount of time required for a buyer to go through the purchase process. Ultimately, this can result in a higher rate of successful MCA sales.
How Are Merchant Cash Advances Sold?
The loan broker’s role is to identify potential borrowers, evaluate them, and offer them the best MCA product for their needs. To do this, the broker must have an in-depth understanding of the borrower’s financial situation, business model, and the industry they are in. This helps them determine the best repayment terms and rates.
For the brokers to successfully sell an MCA, they must have proper underwriting and due diligence processes in place. This includes collecting documentation from the borrower, evaluating their credit risk, and ensuring that all terms of the contract are met.
Once the broker has identified a suitable borrower, they will negotiate the MCA terms with the lender. The broker will then prepare and package the deal for approval. Once it is approved, the broker will be responsible for setting up the repayment plan and collecting payments from the borrower.
What Is the MCA Selling and Funding Process?
The step-by-step process of both selling and funding an MCA is long but manageable. Here’s generally how it’ll go:
- A sales agent approaches a business owner to discuss the benefits of an MCA.
- The business owner is asked to fill out the basic application forms and often is required to provide a few months of card processing receipts and business bank statements.
- The sales agent connects with the business owner to answer any initial questions and help with forms, as needed.
- The underwriting process begins and the sales agent evaluates the business to decide which merchant cash advance lenders will work best for their needs.
- The business’s application is sent to the lenders for evaluation.
- Offers and conditions of funding are sent to the broker from the lender.
- The sales agent presents these offers to the business owner.
- The business owner evaluates and selects the offer they like best.
- The broker requests the contract forms from the lender the business has chosen and then sends the contract to the business owner.
- After the business owner reviews the forms, the sales agent collects them and any other documents from the business owner and sends them back to the lender.
- The lender processes the final documents and the last of the underwriting process is completed and the lender releases the funds to the business owner.
- The sales agent receives a commission for helping conduct the deal.
6. Consistently Follow Up with Potential Customers
When selling a merchant cash advance, it’s important to remain persistent in following up with potential customers. You may feel uncomfortable pushing customers to get them to make a decision, but consistent follow-ups are essential to close the sale.
A good way to stay in contact is by calling and emailing customers at regular intervals. These follow-up calls and emails should be friendly, informative, and professional. You can also use social media messages to stay in contact and provide updates regarding the cash advance.
The key to successful follow-up is to ensure the customer is aware of the product and its benefits, as well as the next step. Make sure to keep track of who you have contacted and when, so you will know which customers to reach out to next. If a customer does not respond to your follow-up attempts, it may be time to move on to another customer.
7. Keep a Positive Attitude
No matter how hard you work, selling a merchant cash advance can be difficult and discouraging, especially when you don’t get the desired outcome. That’s why it’s important to maintain a positive attitude at all times. In order to do this, make sure to:
- Have a growth mindset. This means embracing the challenges you face, believing that you can improve with the right knowledge and effort, and understanding that failure is a part of the process. Setting realistic expectations for success and understanding that no sale is “easy” will help you persevere, even when things don't go as planned right away.
- Use positive language and frame your experiences in a positive light. Instead of thinking “I can’t do this”, reframe that thought as “I can do this, but it won’t be easy”. This will help keep you motivated and help you focus on long-term goals.
- Have confidence in yourself and your product. Believe in the value of your merchant cash advance and be willing to discuss it with potential customers. Having a confident attitude and being knowledgeable about what you are selling will instill confidence in potential customers and make them more likely to invest.
8. Seal the Deal
Once you have a qualified lead and you have delivered a pitch that has interest and support, move on to the process of closing the sale. Here’s what you need to do to seal the deal:
- Review closing documents. Make sure you review all the documents that need to be signed and provide an explanation if necessary. Clarify any points of confusion and remember to emphasize the benefits of the merchant cash advance product.
- Ensure a smooth process. Set expectations with your potential client regarding the timeframes and provide them with an estimated timeline of when they can expect the money to be in their bank account. Verify that all the steps are taken in a timely manner.
- Follow up. Provide the contact with a confirmation email and ask for any final questions or concerns you may have not addressed.
- Utilize feedback. Ask for feedback from your client after the sale is complete. This will provide you with insights on what could have been done better, so you can utilize these for your next sale.
Ways to Make Good Money Selling Merchant Cash Advances
When it comes to selling merchant cash advances, there are a few key factors that can make or break your success:
- Fully understand the terms of the merchant cash advance. Obviously, this is going to be pretty important since your client will rely on you to have all the information.
- Negotiate terms around the advance’s amount, rate, and payback period. The typical advance amount is anywhere from 10% to 100% of a business’s average monthly credit card sales. The rate is typically a flat fee, expressed as a percentage of the sales, and the payback periods range from a few months to a few years in certain cases. It’s important to understand these figures so that you can make the best decisions for your customers and yourself.
- Consider the commission you’ll earn. Commissions for merchant cash advances are typically expressed as a percentage of the advance and have a large range. It’s important to be mindful of the commission rates because they will play a large factor in your profitability.
How Much Money Can You Make Selling MCAs?
When it comes to selling MCAs, the potential to make money is largely dependent on how much effort you’re willing to put into it. Every merchant has a different financial profile, and the amount you can earn from selling an MCA will depend on a variety of factors. Generally, an MCA salesperson that consistently makes sales can expect a high income from this line of work.
Tips to Increase Merchant Cash Advance Sales
MCAs can be a very valuable product for businesses, making your job as the seller a little easier. But, to help you increase your sales even more, here are a few tips:
- Have a unique selling point. Having a unique selling point is key when it comes to selling an MCA. What sets you apart from your competition? What services can you offer that they can’t? Knowing your own strengths and being able to effectively communicate how they can help your customers will give you an edge in a competitive market.
- Screen the client. Know who you’re dealing with, what they need, and if they’ll be able to properly use the merchant cash advance. Ensure that you fully understand their business situation, financial needs, and goals. This will help you create an effective solution for the merchant.
- Solve the merchant’s problem. Solving the merchant’s problem is the ultimate goal in selling a merchant cash advance. You must have a good understanding of the product and how it can help the merchant. Be sure to explain how the product works, what the benefits are, and how the merchant will be able to take advantage of them.
- Make an emotional appeal. Show the merchant how your product can help them reach their goals, meet their challenges and make their lives better. Demonstrate the value of the product and how it can help them reach their objectives in a timely manner.
- Rely on repetition. Repetition is key when it comes to selling a merchant cash advance. Take the time to explain the product and its benefits multiple times. The key is to ensure that your message is heard by the merchant and relevant to their individual needs. Walk them through the process step-by-step to ensure that they understand the potential impact of the product and why it’s worth their investment.
How to Use Outbound Marketing for MCA Lead Generation
Outbound marketing is an important part of selling an MCA and can be a great way to generate leads. Here are some outbound marketing strategies to consider:
- Social media advertisements. Leverage the power of social media to reach potential customers who may be interested in an MCA.
- Boosted social media posts. Boosting posts on social media, such as on Facebook, Instagram, and LinkedIn can help get the word out to targeted audiences.
- Pay-per-click advertising. Utilizing search engine marketing (SEM) and pay-per-click (PPC) advertising through Google AdWords or other platforms can help generate more quality leads.
- Cold calling. Reaching out to potential customers on the phone may seem a little old-school to some generations, but it can be a great way to generate leads and create a personal experience for the buyer.
- Email marketing. Sending emails to targeted customer lists can help bring in more leads for your MCA.
- Print and radio ads. Traditional print and radio ads may still be effective in certain markets and demographics.
- Video advertisements. Creating videos to post online or even on television can help capture attention and create more leads.
- Tradeshow and industry events. Attending trade shows and other industry events can be an effective way to build relationships and generate MCA leads.
- Email newsletters. Developing and sending email newsletters can be a great way to keep potential customers informed of any MCA offers.
Selling a merchant cash advance can be a great way for businesses to access short-term capital for their needs. However, due to the high-risk nature of the product, lenders must ensure they have all the necessary information available and that they understand the potential risks involved when considering offering a merchant cash advance. With proper education and understanding, businesses can successfully obtain and use a merchant cash advance to maximize their potential and take their business to the next level.