Rapid Finance merchant cash advance review

About Rapid Finance

Rapid Finance, (Rapid) is often considered the largest and most well-known merchant cash advance (MCA) provider in the United States. The company also offers various other types of business financing, including small business loans, lines of credit, bridge loans, SBA loans, asset-based loans, and invoice factoring.

Based in Bethesda, MD, Rapid has been around since 2005 and has provided over $2 billion in financing to small and mid-sized businesses. The company is powered by its extensive technology systems that evaluate customer applications and make rapid decisions on whether to fund, and on what terms.

What are the benefits of an MCA from Rapid?

Simple application process and fast approvals

In many cases Rapid’s technology-enhanced application process allows customers to apply fully online, requiring only four documents:

• Government-issued photo ID (driver’s license, passport)
• Voided check from your business checking account
• Last three statements from your business bank account
• Last three credit card processing statements

If approved, the business typically receives a number of different funding amounts and payment schedules from which to choose. Funding can occur in as little as 24 hours. (It is always a good idea to read the documents completely and in great detail, preferably with the help of your attorney, to be sure you are not agreeing to anything you may not be able to live with later.)

Low personal credit score not a barrier

MCAs are made based on the business’s ability to make payments out of future credit card sales, so the approval process is not specifically tied to the owner’s personal credit score. Rapid can thus fund a business that has a solid history of credit card sales, even if the owner has a credit score as low as 500. As a result, an MCA may be a good option for a business owner with a low credit score, which may inhibit their ability to get more traditional types of financing. Owners with better credit scores may qualify for more favorable terms, including larger funding amounts or smaller paybacks.

Funding for businesses with as little as three months of credit card sales history

While Rapid prefers to fund businesses with a full year of operations, it does offer “starter” MCAs to companies with as little as three months of credit card sales history. The maximum funding for companies approved in these cases is typically 50% of the average monthly credit card sales.

Funding as high as 250% of monthly credit card sales

For businesses with very strong financial histories, Rapid can advance up to 250% of average monthly credit card sales. This level of funding can be especially attractive to companies experiencing strong month over month sales growth. If the growth continues, so will their daily payback amounts, and it may be possible for them to pay off the larger amount in a similar time frame to companies with more steady sales histories, which receive lower funding amounts.

Flexible and variable payments

Rapid takes a percentage of every credit card sale, meaning that if sales are slow in a given period, the business pays less than it would in a period with normal sales. This variable payment method is designed to leave the business with more cash to cover its other needs than would be the case if the MCA required a fixed monthly payment. Rapid often structures the payments with a percent of credit card sales that will allow the MCA to be paid off in 6 to 8 months if the business’s sales are in line with historical averages. If sales are stronger than usual, a business can complete its payments ahead of this schedule. Conversely, if sales are slow the MCA could be paid back over a longer time frame.

No worry about late payments

Because Rapid takes the payments directly from the credit card processor at the point of sale, there is no action required of the business to make its payments. Hence there’s no worry that the owner might forget to make a payment and incur a late payment fee.

Who is a Rapid Finance MCA appropriate for?

• Business owners with less than stellar credit but strong sales numbers
• Businesses that do a significant percent of their sales via credit card
• Businesses that need immediate funds for new equipment, inventory, or working capital but are unable to qualify for more traditional types of financing
• Businesses that could qualify for traditional business financing but which need funds now and do not have the extensive time required to navigate the application and approval process, which can be very slow

Who is a Rapid Finance MCA not appropriate for?

• Businesses that have access to other, less costly types of financing
• Businesses with longer term funding needs, permitting them to endure the slower process of applying for and receiving standard business financing
• Businesses that do very little in credit card sales
• Businesses in industries deemed to be higher risk, like adult entertainment, gambling, cryptocurrency, nightclubs, etc., which are typically not eligible. Check with Rapid to see if your industry qualifies.

The basic financials of a Rapid Finance MCA

The basics of how an MCA works are rather straightforward:

• The MCA funding company advances the business a fixed amount of cash, in return for the business’s agreement to repay a larger amount over time;
• The MCA funder receives these payments by automatically taking a fixed percentage of every credit card transaction done by the business, until the total agreed-upon amount is paid.
• The exact numbers involved for any given MCA are, of course, a bit more nuanced. In order to have a better estimate of what the financial cost of an MCA is to the business, a deeper dive is required. We provide a more complete explanation here.

Here are some of the parameters around the MCAs from Rapid Finance:

Rapid Finance generally has good reviews online and an A+ rating with the Better Business Bureau, with very few customer complaints on record. The company has extremely positive reviews on Trustpilot, with a 4.9 out of 5 rating.

What regulatory protection do you have with Rapid Finance?

It is important to be aware that the Merchant Cash Advance industry is an unregulated industry, meaning that many of the protections you would have in taking a business loan from a bank or other regulated financial institution do not exist. When it comes to MCAs, the motto must be “Caveat Emptor.” i.e., let the buyer beware.

First and foremost, in the world of regulated finance there are usury laws in each state that limit the amount of interest that can be charged on a loan. It is thus illegal for regulated financial institutions to charge astronomical (i.e., “usurious”) interest rates.

However, an MCA from Reliant or any other entity is not actually a loan, although it may resemble one to the untrained eye. It is this technicality that allows MCA funders to obtain payback amounts that equate to effective interest rates of well in excess of 100% per year. This situation is possible because an MCA is structured as a purchase of future receivables rather than a loan, and it is thus not subject to regulation. While many experts agree that it’s only a matter of time until the MCA industry is required to submit to some form of regulation, for the time being that is not the case.

Given that you will likely have little to no recourse if anything goes wrong, it is a good practice to read the fine print of any agreement you enter into with an MCA funding company – preferably with the help of an attorney. As with any financial agreement, before you sign anything you want to know exactly what you’re agreeing to and how much you’ll be paying overall.