Merchant Cash Advance vs. Traditional Bank Loans

If your business needs a cash advance quickly and you don’t want to take out a loan with your bank, you may wonder if you have any other options. Fortunately, you do have choices to get the cash you need without going further into debt. A merchant cash advance (MCA) in a great financing alternative that offers many benefits over a traditional bank loan.

What Is a Merchant Cash Advance?

With this type of financing, the lender purchases your future receivables at a discount. You have immediate access to cash, and the lender takes a portion of revenue from your future credit card sales. It’s not a loan, so providers are not subject to the same regulations that banks have to adhere to.

How Is It Different From a Bank Loan?

An MCA has less paperwork than a bank loan, and you generally get cash within a week. An MCA has a higher approval rate, because the provider is not looking at your credit score. You will need to show a track record of sales through credit and debit cards. If you don’t qualify for a loan, you could more easily quality for an MCA.

With this type of financing, you are not providing collateral for security. You do not have to put your own credit or home on the line for your business. None of your business assets will be at risk either. You will not have restrictions on how you can use the money, and no one will follow up with you to make sure the funds where appropriately spent. Your repayment schedule is based on your sales. If you have a slower month, your repayment slows but you don’t have to make a set payment.

Are There Cons With an MCA?

One of the biggest cons with a merchant cash advance, according to critics, is the higher interest rate which makes them more expensive. But with the tightened credit market, small businesses may find it difficult to get a small loan or credit line. If your business needs a small cash advance, an MCA can solve a short-term problem without going further into debt or taking on another investor.

Discuss Your Options With an MCA Provider

If your business is looking a merchant cash advance, it pays to talk to a professional who can answer your questions. You don’t have to worry about the MCA provider taking all of your receipts so that you cannot continue to operate profitably, but you do have to uphold the terms of your contract. Find the financing your business needs when you have cash flow problems by speaking to an MCA partner.

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