Research showed that at least 96% of the businesses in the United States of America fall under the category of the small business. This figure suggests that they are high in the number, but this does not mean that those small businesses are immune to the cash flow problems. Nearly most of the small businesses apply for external funding. This external funding can be from a bank or online lenders. You can choose between business or merchant cash advance or a small business loan.
A business loan is further divided into multiple types, each has its attributes, pros, and cons, and the same is the case with a business or merchant cash advance. So before we explore some advantages of the merchant cash advance over the business loan. Let us briefly define both of these funding terms:
We know you are familiar with the form and structure of a small business loan, consider this a refresher. Although this needs so explanation, business loans are money lent to the borrower by the lender. The borrower, on the other hand, agrees to pay back the loan with interest in the given time. A business loan can either be secured or unsecured.
Merchant Cash Advance
The similarity between a business loan and a cash advance is that the lender offers the money to the lender. But the way to make the repayment is different; in merchant cash advance the borrower pays back by offering a small percentage of the future credit or debit sales.
Now that we have revised the basics of the business loan and the merchant cash advance, let us explore factors that give merchant cash advance an edge over the business loan.
- Simple application
If you have applied for a business loan by a bank before then you must be familiar with a lengthy application and never-ending documents. Same is a case when you apply for a business loan by a small business administration, but when you apply for a merchant cash advance you can fill the entire application in three to five minutes.
Time holds great value in the small business world. Other than being time-consuming, lengthy and complicated applications can also frustrating. Business owners who prefer to indulge in the simple and relaxed funding process apply for a cash advance rather than a business loan.
- Fast funding
Though it is wise to keep yourself ahead of the financial crisis, bit often financial crises comes as a surprise. In scenarios like those, a business owner benefits from instant or fast funding. Merchant Cash Advance is another name for fast funding.
The application is like a piece of cake, after that; you need to submit a credit score report and bank statements. If the lender approves your application, the cash advance can be in your account in less than a day.
- More chances of getting approved
Imagine filling out a complicated application in an hour, attaching hundreds of documents, and then reading the mail of rejection. Won’t it be disappointed to know that you don’t get equipment loan for your construction business? With a cash advance, you don’t have to sit and bite your nails and wait for the final verdict.
Here, the cash advance companies know that they have access to your future revenue, so they have a laid-back qualification criterion. A compared to other business loans you have a higher chance of getting a merchant cash advance.
- Use funds as you please!
Banks and SBA require a valid rationale and legit explanation behind the loan and in some cases, you can only spend the loan as mentioned in the plan. For example, if you apply for restaurant equipment financing, you can only use the money to buy machines for your restaurant.
However, a business owner can use a merchant cash advance for various reasons. If you need to spend money on hiring and training of new employees, you can! If you need money to purchase a new machine, you can! If you want to use the money to expand your business, you can! You have the freedom to use the money as you please!
Want to use the money on your term? Apply for a cash advance rather than a business loan.
- No need to offer collateral.
All of the secured business loans require some collateral as a guarantee. Not every small business owner is capable of offering collateral. A cash advance does not require any collateral; it allows its lender to enjoy the extra cash flow without the constant fear of losing valuable assets.
The fact that a merchant cash advance has a no-collateral policy, makes it preferable over other business loans.
- No fixed monthly payments.
As you know a business owner who is using cash advance makes a payment from his or her business’ future revenue. Cash advance borrowers don’t have to worry about daily, weekly, and monthly installments because the lender is already taking a small percentage of credit card sales.
In addition to this, bank loans have fixed interest rates but cash advance has a variable interest rate. If your business is doing well, the cash advance lender will take a large percentage of future revenue and vice versa.
After reading these six points you must be convinced that a merchant cash advance is a better funding option than a traditional loan. So what are you waiting for? Head over to the official website of Merchant Advisors and apply for a Merchant Cash Advance. For more information, the pros and cons of the merchant cash advance, follow us on Facebook and Twitter (@Onlinecheck). If you have any question, feel free to call us on our toll-free number at (833) 827-4412, our loyal and keen financial advisor will answer your every question and guide you throughout the way.