Can I Get a Bank Loan After Taking a Merchant Cash Advance?
Yes, many owners move from an advance to a bank loan once their business is established and their finances look strong. Banks will see the advance on your statements and its UCC filing, so a paid off advance with a termination on record reads far better than an active one.
What do banks look for in a business loan?
Banks lend based on tax returns, financial statements, credit history, collateral and time in business. They want to see that the business earns enough profit to cover loan payments with room to spare. An active advance reduces that room, because its payments come out of the same cash flow.
How does an active advance affect a bank loan?
- The daily or weekly payment lowers the cash the bank sees available for its loan.
- The funder's UCC filing gives it a claim the bank will want resolved.
- Some banks see recent advances as a sign of cash flow stress.
Many banks want the advance paid off at or before closing, sometimes using the loan proceeds.
How do you get ready to apply for a bank loan?
Keep your books clean and your returns filed. Pay off or pay down advances where you can. Get zero balance letters and make sure UCC terminations are filed. Avoid new advances in the months before you go to the bank.
Can a bank loan refinance an MCA?
Some owners use a bank or SBA loan to pay off an advance. Banks handle this by paying the funder directly at closing, based on a payoff letter. Ask the funder for one with a good through date that covers the expected closing.
What if the bank says no?
Ask why. It's often time in business, profitability or existing debt. Each of those can improve with time, and a clean payoff history on an advance helps.
What does Afterfirst do while you work toward a bank loan?
We don't arrange bank loans. Our five services are same-day advances, second and third position, consolidation, revenue-based financing and business lines of credit. If a bank loan is the better fit, we'll tell you.
How do owners step up from advances to bank credit?
Many businesses use an advance while they're young, then move to a line of credit and eventually a bank loan as their history grows. That path is normal, and each step makes the next easier.
How do you explain an advance to a bank?
Banks see advances often and don't automatically hold them against you. Explain what the money was for and how you paid it. A short, confident explanation of a finished advance, with the zero balance letter attached, turns a question into a non-issue. An advance that's still active needs a plan for how it gets paid off or fits alongside the loan.
How can Afterfirst help with this?
Call 877-FUND-654 and tell us where you are and where you want to be. If a bank loan is within reach, we'll say so and help you with payoff letters on any advance you're carrying.
What else do owners ask about this?
- Can I refinance a merchant cash advance with an SBA loan?
- Will an MCA's UCC filing stop me from getting a bank loan?
- How do I build business credit for my small business?
More short answers on this topic are on the credit and liens FAQ, and the MCA apr calculator runs the numbers for your own file.
Have a question we didn't answer?
Ask us on the call. Call 877-FUND-654 with any question. We call you back, usually the same business day, and we always talk with you before we shop your file.