Both merchant cash advances and business loans can be used as a funding source to pay for business needs such as payroll, inventory, utilities and rents, and a number of other expenses. However, there are some important differences between these two funding sources, and those differences have major implications for your business. That means it’s critical to have an understanding of how they differ, so you make the right choice when seeking a funding source.

Traditional Business Loans

Whenever you take out a traditional business loan, you will receive some kind of lump sum, and you’ll be responsible for paying that amount off in a fixed monthly amount. In some cases, it will be necessary to secure that loan with collateral, while in other cases you might be able to obtain an unsecured loan. To qualify for a traditional business loan, you will generally need to have a strong credit score, you will need to have been in business for several years, and you will need to provide strong financial statements which show business stability and profitability. It will generally take a number of weeks or months in order to actually get the money in your hands from a traditional business loan.

Merchant Cash Advances

Your business would ordinarily be a good candidate for a merchant cash advance if you have a high volume of credit card purchases every month. When you are approved for a merchant cash advance, you would be supplied with a lump sum amount, and you would pay for this by having amounts subtracted by the lender from your credit card account, either daily, weekly, or monthly. In order to qualify for a merchant cash advance, the primary criterion will be the volume of your credit card sales and not your credit history or length of business operations. There is no collateral required for this kind of transaction since the lender is given surety by the fact that you have a demonstrated level of credit card activity every month.

Need a Merchant Cash Advance? 

For many businesses, a merchant cash advance is an innovative source of needed funding and is much preferred over traditional bank loans. If you’re considering a merchant cash advance, contact us today so we can discuss how it might help your business, and how it could be set up.