Meta Description: We are aware that finding your way through the murky financial waters can be an unpleasant encounter. Here is an overview of merchant cash advances and big banks to help you evaluate your options.
When it comes to fostering sustainable business growth, the need to obtain financing is unavoidable. The two most common financing options that businesses consider are merchant cash advance or big bank loans. However, small to mid-size businesses often have a hard time securing a loan from big banks, hence the relevance of merchant cash advance. How do the two compare, and which option is the best for small to mid-size businesses? Keep reading to learn how SMEs can benefit from merchant cash advances.
Qualification requirements and speed of processing
Merchant cash advance tends to have fewer qualification requirements. In most cases, all that you have to provide are your bank statements and the history of your merchant account. The provider uses these to evaluate your past performance to determine your ability to meet the cash advance. Considering the minimal restrictions involved, most businesses often qualify and get their financing faster.
On the other hand, big banks also have qualification requirements. However, they tend to ask for more documents than the latter, including tax records, collateral, credit ratings, and much more. As a result of the many documents requested, banks take longer to review the eligibility of your business.
Repayment terms and interest rates
When you get a merchant cash advance, you will not be receiving a loan. What you get is a cash advance against future sales. Due to this approach, you can structure repayments in a manner that favors the business. For instance, you may decide to create a holdback of seven days a week, basing the percentage of repayments on credit card sales. Alternatively, you can choose to set a fixed daily payment that runs from Monday to Friday.
Concerning big bank loans, you are legally obligated to abide by the laws governing how much the lender can charge. Also, the bank will often need agreed-upon monthly repayments without considering how well the business is performing.
Benefits of going for a merchant cash advance
Most small to medium-size businesses will find it viable to choose merchant cash advance because of the benefits offered. These include:
- Easy application process
When applying for a merchant cash advance, you will typically fill an online form and provide easy-to-access documents. The application process could be over within 48 hours.
- Quick access to capital
Once you meet the simple qualification requirements, you can have the financing in less than a week. That helps you put the money in your business and enhance cash flow.
- Does not affect your credit
Your business credit remains intact even as you apply for a merchant cash advance. That’s because the cash advance is not a loan. Thus, you do not have to worry about improving your credit before applying.
When securing financing for your business, small to mid-size businesses are better off starting with a merchant cash advance before looking into big banks. Not only do you stand a chance to get your financing quickly, but it also saves you the stress associated with managing bank loans.