Site Last Updated 05/16/2012
The Press Room
Business Cash Advance vs. Business Loans
August 18, 2009
By definition, a business cash advance is when you sell your future credit card sales to receive funds for immediate working capital. Seeing as your credit is irrelevant in this situation, it’s essentially a failsafe method for obtaining funding. Some merchants, however, are still hesitant; why get a cash advance when one can just get a business loan, which is a common and trusted method of getting funding?
By definition, a business cash advance is when you sell your future credit card sales to receive funds for immediate working capital. Seeing as your credit is irrelevant in this situation, it’s essentially a failsafe method for obtaining funding. Some merchants, however, are still hesitant; why get a cash advance when one can just get a business loan, which is a common and trusted method of getting funding?
Cash advances and business loans are extremely different in many ways. Most notably being the fact that, generally, you don’t need good credit to receive a cash advance. Business loans not only require you to have good credit to receive any kind of reasonable interest rates, but on top of that, you may need collateral to obtain your loan. With a business cash advance, you are not receiving a loan at all; you are selling your future credit card income. This means that you don’t need any collateral, and that your immediate credit score is irrelevant.
Another notable difference between business cash advances and business loans, and what most small business owners in the position of needing funding will consider a benefit, is that there are no set payment terms. The lender that you sold your future sales to will receive a predetermined percentage of your future sales directly through your merchant account. This means that there is no worry in regards to meeting a monthly minimum for repayment; you only pay what you receive in credit card transactions.
But is that percentage going to drain your company of all working capital?
The short answer is no.
The company that you sold your future sales to wants to get paid. If they drain all of your income, they know that your business will have NO funding to work with, rendering you, for all intents and purposes, bankrupt. If your business closes, how will they get paid?
Another benefit to a cash advance as opposed to a business loan are the quick payment terms. When you sell your credit card income, generally, the repayment period is only a matter of months. So,
No set amount for monthly repayment,
You won’t carry a loan payment schedule for years; your contract will be months, rather;
Money is received instantly, there is no credit check and approval process
Use the cash however you want; payroll, expansion, restocking, etc
No collateral required
No credit required
and no evidence as such on your credit report; you are making a sale, not financing cash.
A business loan may be the best option for businesses who are not in immediate need of funding and have substantial collateral, or who are seeking an amount of funding that grossly exceeds the volume of credit cards they process each month. But for those who don’t have collateral, who don’t have good credit and who need cash now, a business cash advance is not only an option to be considered, but an option that should be taken and used.
TESTIMONIALS
Aamco Transmissions
I am writing to thank you for your service and assistance in saving my business. I was absolutely impressed with the professionalism you displayed was as pain free as possible for me More...
Minor Family Auto
Merchant Advisors was extremely easy to work with and our representative stayed in constant contact with us through the entire application process. More...
