It is interesting to see during this recent business credit crunch that the average credit profile for a merchant cash advance applicant is on the rise. We have seen a plethora of FICO scores in the 700s and even 800s which typically first seek traditional bank loans and credit lines before seeking alternative funding products such as a merchant cash advance. As I mentioned in my previous post, Merchant Cash Advance And The Business Credit Crunch, that the current conditions of the credit environment is an opportunity to introduce businesses to the merchant cash advance product that historically may have sought other options.
As I also pointed out previously, these better credit applicants will be less receptive to "cheap marketing" techniques such as voice broadcasting but require a more consultative approach about this product. There is an opportunity here that once the better credit score applicants are exposed to this product that they can use it in conjunction with traditional bank loan products once the credit markets eventually open up should the traditional product not be able to meet 100% of their needs. For example, a bank may only be willing to eventually give a business a $100,000 line of credit when they need $150,000 and this is where they can mix it with an additional $50,000 through a merchant cash advance. Time will tell, but I believe the average FICO score of the merchant cash advance customer will increase and remain higher once the credit markets / banks open up again to small businesses.