Along with the increase in the proliferation of small businesses, the need for financing also increased. To answer this need, various loan companies and financial institutions have offered financial services. The best thing about the great competition on the side of these lenders is that they are continually devising ways to make things better and better for entrepreneurs, proposing innovative solutions. Two financial services that this article tries to discuss are the small business loan versus the merchant cash advance.
In the past, traditional small business loans were the answer to an entrepreneur’s need for funds. Nowadays, many forms of financing have evolved towards more sophisticated models that have integrated ease and speed in the acquisition. A business cash advance is one of these innovations in financial services. Let’s take a look at the characteristics of each one in order to distinguish which source of money is the right one for our business and financial needs.
Common requirements when applying for a small business loan include that the prospective borrower must have a good credit history and that the business must have been in business for a certain number of years. With most banks, you may have to put up your physical assets as collateral to receive the necessary business loan. Most applications for these traditional means of financing have a higher chance of being rejected. In the application process, just the presentation of the documentation could take from 1 to 4 weeks. If you have good credit and are approved for a small business loan, it could take 4-8 weeks before your money is released. Payment terms are made monthly and failure to comply with this may result in default on the small business loan.
The merchant cash advance, on the other hand, boasts an incredible approval rate of 90% and above, as the lending company does not assess the credit history of the borrower but rather the company’s ability to obtain future card sales. of credit. With fewer requirements to meet, the application process is much quicker than getting a small business loan, and in an average of 24-72 hours, the applicant will already know the lender’s response. Once approved, funds can be available in less than seven days. Unlike small business loans, merchant cash advance repayment is taken as a percentage of future credit card sales until the loan amount is repaid in full.
By comparison, Merchant Cash Advance obviously dwarfs Small Business Cash Advance in both ease and speed of acquisition.
