As a business owner; you may be thinking of ways to get funding for your business. It could be for any number of reasons; maybe you want to make renovations to your building, or create a big marketing push. Whatever the reason, you need cash.
During your research you keep running into the terms Business Cash Advance or merchant loan, but you’re not sure what they are so you dig a little deeper. It turns out that they are an alternative to the traditional business loan.
More about business cash advances
A business cash advance differs from a business loan in several ways;
Business loans require extensive background checks and years worth of documents whereas a merchant loan only requires four months of merchant statements and a 2 page form.
Business loans have a set payback schedule and a set payback amount, whereas credit card advance loans uses a percentage of your daily credit card sales as the basis for your payback amount. What this does is creates a flexible payback amount that changes depending on your daily sales. This is particularly beneficial during slow periods.
A Business cash advance does not show up on your credit report. This can be beneficial if you want to get a bank loan for additional funding down the road.
credit card advance loans do not require collateral. If (knock on wood) circumstances make it necessary close your business and default on your advance; they cannot come after your house or other assets.
A small business loan can take several weeks or even months to process. With a business credit card advance you get your cash in less than a week in most cases. If you need cash in a hurry, this may be your only option.
Business cash advances are relatively more expensive than business bank loans. There are a lot more inherent risks involved with credit card advance loans and are therefore more expensive.
Bank loans require good FICO scores, even if your business is doing well. Merchant loans don’t require a good credit history. They typically just look at a four months of your business’s merchant statements as the main determinate for your advance amount. If you have less than perfect credit, this may be your best alternative.
Generally speaking; a bank loan is typically the best option if price is your only consideration. However, a credit card advance loan offers many businesses’ access to working capital when access wasn’t possible before.
If you are considering a business loan but want to learn more about a merchant cash advance; use the preceding link to learn more.