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Does a Merchant Cash Advance Report to Credit Bureaus?

Let’s cut straight to the chase, shall we? If you’re here, chances are – you have some burning questions about merchant cash advances (MCAs). Specifically: whether getting an MCA could potentially impact your credit score.

Well, you’ve come to the right place. This article will break it all down for you, no legalese, no jargon – just straight facts from the front lines.

What Exactly is a Merchant Cash Advance?

First things first, a quick primer: a merchant cash advance is a type of alternative business financing where the provider purchases a portion of your future receivables at a discount.

So, it’s not technically a loan – but functions in a similar way by providing upfront capital that you, the merchant, repay via a percentage of your daily credit and debit card sales.

The big difference from a traditional loan? MCAs are unsecured. No collateral or personal guarantees required. The tradeoff? Higher factor rates and shorter terms.

Do Merchant Cash Advances Go On Your Credit Report?

Okay, onto the million dollar question: do MCAs show up on your personal or business credit reports? Well, it depends:

For Personal Credit Reports

Generally speaking, no – merchant cash advance lenders do not report to personal credit bureaus like Experian, Equifax or TransUnion.

Why’s that? Since MCAs are technically not loans, the transactions don’t get recorded on your individual consumer credit file.

Of course, every lender is different. Some shady MCA providers might conduct hard credit inquiries during the approval process, which can ding your personal credit score temporarily.

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But for the most part? An MCA alone won’t impact your individual FICO or VantageScore.

For Business Credit Reports

Now, this is where things get a little murkier. Certain MCA lenders may report advances on commercial credit reports like those from Dun & Bradstreet, Experian Business, or Equifax Business.

The rationale? Technically, the MCA is a debt obligation for the business – not you personally. So, keeping track of repayment history gives the bureaus data to calculate your company’s overall creditworthiness.

Of course, it’s a double-edged sword. While on-time payments could help build your business credit, any defaults or delinquencies will almost certainly show up as negative items.

“Well, What If…”

I know what you’re thinking: “That’s all well and good, but what if I take out a merchant cash advance using my personal credit?”

An interesting hypothetical. While using personal credit to qualify might cause the MCA to get reported on your individual file, the jury’s still out.

Most reputable MCA lenders have safeguards to prevent this from occurring. But you’d definitely want to inquire about their specific policies before signing on the dotted line – just to be safe.

The Golden Rule for Merchant Cash Advances

At the end of the day, while merchant cash advances probably won’t show up on your personal credit reports – defaulting could still spell bad news in other ways:

The lender might hire debt collectors. Or try to garnish your future income directly from the processor. They could even take you to court over the outstanding balance.

So, the golden rule? only accept mca terms you know you can repay.

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Carefully review the factor rate, payback period and personal liability before getting an advance. And if it seems unsustainable – walk away! Protecting your personal and business credit is crucial.

The Bottom Line

At this stage, I imagine you have a much better grasp on whether merchant cash advances report to credit bureaus.

As always, be sure to do your homework on any potential MCA lender. Read the fine print carefully, ask questions and make sure you understand the repercussions of default.

An MCA can be a great way to cover temporary cash shortfalls – when used responsibly. But if you over-leverage your business, well…let’s just say it won’t be pretty.

So tread carefully when dealing with merchant cash advance providers. Your financial future could very well depend on it.

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