Contracts and additional Documentation

Once underwriting has completed their work, a program is produced for the merchant of what the maximum funding amount is.  Usually, the underwriter will tailor a program geared towards the initial requests of the merchant (if possible).  The cost of the money will range for different programs.  A merchant can expect to pay a factored amount  anywhere between 1.25 to 1.50 on the requested money.

A small business loan from a business cash advance company usually expects to complete payment within 5 – 9 months.  The reason for this is because the lender is dealing with high-risk businesses and unsecured money.  Merchants must remember that these companies are not banks, and the loan is not attached to any collateral or any personal guarantor.  Shorter programs will have relatively higher hold-back percentages (the percentage taken from the Visa/MasterCard sales) but the money itself will be cheaper.  For a longer program, the hold-back percentage will be relatively lower, but the cost of the money will be higher.

Once the merchant and the lender agree on numbers, contracts are drawn and some additional information is required from the merchant.  Usually this includes a lease more most recent mortgage statement, drivers license of all owners on the contracts, a voided check, month to date processing, a business certificate, and a franchise agreement if applicable.  Also, a Profit Loss and Balance Sheet may also be required for funded amounts over a certain amount.

There may also be a clause in the contracts for a fee, usually ranging between 2.5% – 5% depending on the merchant’s file.

To read about the next step, processing!