A business loan is the traditional means of funding that a business obtains to continually thrive in the competitive market and ultimately achieve longevity. With the developments brought forth by technological advancements, innovative financial programs such as merchant cash advance came into existence. Many critics say that the merchant cash advance was designed to answer to the continually rising and evolving needs of entrepreneurs that small business loans are not able to accommodate. Though both are forms of borrowed money which eventually will need to be repaid with an interest, they also have a lot of varying features and this article distinguishes each.
Because a merchant cash advance is an amount of money that can be borrowed against future sales achieved through the credit line, it is important that the applying entrepreneur can accommodate sales transactions charged on clientele credit. Other general requirements include a minimal length of time that the business has been in operation and minimum monthly credit card sales.
A sound financial background as well as good credit rating is essential in applying for a business loan. For the bank or institution to evaluate your request, you need to procure documents and other necessities such as: a business profile; loan request containing the information on the purpose, amount and type of loan; business and personal financial statements; and collateral.
Because of the huge difference regarding requirements needed to be eligible in acquiring the different financial services, the approval rate with merchant cash advances are about ten times higher than that of business loans.
A merchant cash advance poses as a more ideal solution for quick funding to cover urgent financial matters as the whole process from submission of application, evaluation, approval and release of cash takes less than two weeks.
In applying for a business loan, the submission of paperwork alone could take from 1-4 weeks. And if you are approved of the loan, funding could take somewhere from 4-8 weeks.
Flexible repayment can be availed of with merchant cash advance. Because only a pre-determined percentage will be deducted from the regular credit card sales, borrowers need not worry of coming up additional money in case sales are low. When situation like this occurs, the time until the amount is fully repaid will just be lengthened. Conversely, if the business is doing good cc sales-wise the repayment time will be much shorter.
A business loan arranges a fixed monthly amount and timeframe that you would have to repay the borrowed amount. Failure to comply with this set of arrangement may lead to default of the loan.