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How to Make Money Selling Merchant Cash Advances – Part III

In this series, I am covering “How to Sell Merchant Cash Advances.” If you haven’t read, listened, or watched the previous parts, CLICK HERE for Part I and CLICK HERE for Part II. Today in Part III, I will be discussing how much money you can make selling a merchant cash advance and the process. Let’s begin my […]

In this series, I am covering “How to Sell Merchant Cash Advances.” If you haven’t read, listened, or watched the previous parts, CLICK HERE for Part I and CLICK HERE for Part II.

Today in Part III, I will be discussing how much money you can make selling a merchant cash advance and the process. Let’s begin my going over the process of a merchant cash advance.

So, you are out in the field using the information that I had provided you in Part I and Part II, and you finally have found someone who is interested. What’s next? Well, there is a very simple, one-page form that needs to be filled out along with getting 6 credit card processing statements from the merchant. In other words, you will need to get their last 6 months of credit card processing statements. Now,  many sales partners feel like it is tough to get even one statement from a merchant and are overwhelmed by asking for 6. Trust me, it is a lot easier than you think.


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When you are trying to sell the owner merchant services, it may be a product that they don’t want. However, cash advances are different because this is money that the business needs and if you tell them we will wire $10,000 to your account within 3 to 5 business days, they won’t care about giving you 6 statements.

After the merchant fills out the form and you receive their last 6 credit card processing statements, you then will send this information over to the merchant cash advance company. The company will then respond with, “this is what we can offer the merchant.”  This is similar to a pre-approval. You don’t want to go into detail about the factor rate or the term with the business owner at the beginning because there is no pre-approval yet. Think about a Realtor. They need to get the pre-approval first before discussing how much a house costs because that person may not be able to afford it or have the credit. This is similar.

Whatever information you get back from the merchant cash advance company, you now relay back to the business owner. Once you work out the details with them in terms of the factor rate and everything, the business owner will have to fill out a little more paper which you then send in and wait for approval.

Throughout our company’s whole process, there is usually a portal you can log into and look at the progress of the everything, like if the application approved or something is pending.

The commission really varies with merchant cash advances. There are two types in the industry that you can get depending on the program you partner with. The most common is one where you get paid a percentage of the total amount of payback. In other words, let’s just say you have a $10,000 cash advance and it is a 1.4 factor rate. So, the merchant will pay back $14,000. Most cash advance companies will pay you back a percentage of that $14,000. Depending on the term of a loan or credit of the merchant, the amount, and mostly the factor rate, this will all  determine how much commission you will get.

So, the longer the term, the more commission you will get because of the greater risk for the cash advance company. As mentioned, they also look at the factor rate. The higher the factor rate, the more money that will be available to make, so a higher commission. The highest commission is paid on the shortest term, with the highest factor rate. Obviously, this is not the best thing for the merchant. You really want to go for a longer term with a reasonable factor rate. Yes, you may not make quite as much on that deal, but you are going to make that merchant happy and it will be a good deal for them.

Some cash advance companies will do a 3 month term with a 1.4 factor rate, which is absolutely ridiculous and high. Do they pay good commission? Yes, because there is virtually no risk for them. You really want to aim for that 6 to 10 month term or even go for 12 months if they qualify for what we call a “premium advance.” With these, you can still get good commission rates from 3% to 6% and even up to 8% depending on what that amount is as well as the factor rate. Lets just say the payback amount was $20,000 and you received a 5% advance. You just made a $1,000 commission.

One thing to understand is that merchant cash advance companies to do not pay out commission the same way. Now, one thing that they do have in common is that the pay the commission for the cash advance well after the money has been funded to the business owner, to give them a couple of days to change their mind. On these deals, you are making at least $1,000 to $3,000 of commission. So, before the cash advance companies pay you that amount, they need to make sure the merchant is solid and has their money. Don’t be surprised if you end up waiting a week or two.

Another thing is, some companies do split up and pay some of the money upfront and part of it as a residual. As they are collecting money from the merchant, they are paying you the rest of it. I have seen plans that are 6 and 2, meaning you get 6% of the total loan amount and then you get 2% over the life of the advance.

In our program, we have chosen to pay all of it upfront. We have found that our reps want to make their money and move on to the next cash advance.

James Shepherd

Read previous post:  How to Sell Merchant Cash Advances – Part 2

How to Sell Merchant Cash Advances – Part II

Read next post:  How to Partner WIth Bookkeepers and Accountants

How to Partner With Bookkeepers and Accountants

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