When to use a Business Loan Instead of a Merchant Cash Advance

There has been a lot of hoopla circulating around a new loan alternative called a merchant cash advance (or merchant loan).

One of the reasons so many people are talking about them is because they are a fast, easy way to get working capital without the need for collateral; even if your credit is less than perfect. I’m sure you will agree that there are plenty of reasons to get working capital for your business; but are merchant loans your best choice?

It is no secret that merchant loans are more expensive than traditional business loans. There is a lot of risk involved with lending money; especially in this economy. Many large banks have already gone out of business this year alone. As a result, banks are becoming extremely careful who they loan their money to. If your business qualifies for working capital from a bank; this may be your best option.

Another advantage to receiving a bank loan is that you are given more time to pay back the loan. While banks give you a considerable amount of time to pay them back; a cash advance generally takes 4 to 9 months to pay back. Depending on your circumstances; this can be a good or bad thing.

So overall, getting a business loan over a cash advance is generally a good idea because of the costs involved. But if you are unable to get a bank loan; these advantages aren’t going to help you very much.

When not to use a merchant cash advance

That said; if you plan on getting a merchant cash advance for the following reasons, you should really consider rethinking your strategy. Some of the reason for not getting a merchant loan includes;

• Using the money for a vacation
• Using the money to purchase a car or other large ticket item
• Using the money for anything other than something that will improve your business
• Using the money to pay off credit card debt

When using a credit card advance can really help your business

The business of advancing cash has grown considerably since its inception nearly 10 years ago. The reason is that they offer a fast, convenient way for business to get money. Particularly for businesses that are having difficulty getting approved by the bank. There are tremendous benefits to this type of funding. And when used properly can have a huge impact on the growth of your business. Some of these advantages include;

High approval rate: In fact, many providers boast a 95% approval rate. That means that the money is there for you when you need it. If your credit has taken a few hits over the past few years; this may be your only option.

Get your working capital is less than a week: That is a fraction of the time a bank takes to process your loan. If you need your money in a hurry; this is definitely the better choice.

No collateral: Many business owners either don’t have, or don’t want to risk their personal assets in the event of defaulting on their cash advance. It happens. Though most providers work closely with your business to come up with an advance amount and payback schedule that makes sense to you and takes the least amount of stress on your business; you can never foresee the unforeseeable.

Flexible payback schedule: A merchant loan provider uses a percentage of your daily sales to pay them back. This creates an organic payback schedule that flows with your business. On days when sales are slow; you pay back less. When things pick up; you pay back more. Before you know it; the advance is paid back.

There are a number of other advantages as well. I advise you weigh your options very carefully. You can learn more about this business loan alternative by using the link below. You might be surprised at what you learn.