What is an Existing MCA Position
When applying for a merchant cash advance, funding sources look at the current loans you have to see if you already have an existing advance. But what counts as an existing mca position?
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Other funding types that may be considered an existing position by lenders:
Daily repayment advances such as
bank statement loans
Weekly payment financing.
Monthly payments loans from certain lenders.
Programs that accept existing positions
Multiple existing positions O.K.
No penalty for other debts that are not mca’s.
Business funding that do NOT count as an existing mca position.
1. Installment:
Monthly or weekly installment transactions should not count as an existing position when applying for a cash advance.
Example:Monthly payments for car and personal loans are almost never included in the approval process.
2. Monthly repayment:
Anything that is repaid monthly is almost always considered a separate type of financing.
Most installment loans also have monthly repayment, but not all. These will not be counted against your existing debt on an mca application.
3. Secured:
Secured loans are not considered in your businesses’ ability to repay a short term unsecured advance. It is a different type of debt and not calculated in the analysis.
Existing real estate and equipment debt, as well as accounts receivable financing are not counted against you. As a result, they will not affect your ability to get an advance, nor affect the amount of the advance.
4. Unsecured Revolving Lines
Unsecured lines such as credit cards and personal lines of credit are not included. You can have multiple credit cards or lines of credit because they don’t affect your ability to get an advance against future receivables.
Different terms between the two are a main reason they are separated because unsecured revolving lines usually remain open for years.
Short term advances are paid off in 3 to 9 months. Underwriting knows that you will continue to have that unsecured debt with a minimal monthly payment that is low compared to the advance.
Make sure the new lender is not counting loans or advances you have already paid off. Provide them with a payoff letter on all previous debts that no longer have a balance but may still show one on your credit bureau.
FAQ: Frequently asked Questions on an existing mca position.
What is an existing mca position?
An existing mca position is business financing that is considered the same type as a cash advance. This is usually any financing with a daily or weekly payment. Some monthly payment options may count as an advance, depending on who the lender is.
What business loans count against me when applying for an mca ?
Any business financing that has a once per business day repayment is almost always considered an existing cash advance position.
Do other monthly payment loans count against me?
Other monthly payment business debt does not count against your mca application.
Why does it matter if my business already has cash advances?
New lenders need to know if your business will have the cash flow to pay the new debt. They also consider if you are a habitual cash advance borrower. Lenders probably consider you may take another advance behind theirs.
Conclusion
Short term daily, weekly and sometimes monthly business financing do count as an existing mca position and therefore, your business may not be approved or for lower amounts.
Know the types of loans you already have when applying for cash advances and which one will count against. This will help you understand which type of business loan to apply for and what to expect.
Author Biography: Will Sanio, Owner of SCF Funding, dba SmallBusinessLoansDepot.com, has a Bachelor of Science Degree in Business Administration with a concentration in Finance from the University of Tennessee, Knoxville.
Over 20 Years experience including 10 Years with Wells Fargo, formerly Wachovia Bank and First Atlanta Bank. Specializing in Traditional and Alternative lending.
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