How Does A Merchant Cash Advance Differ From A Bank Loan?

How Does A Merchant Cash Advance Differ From A Bank Loan?

There are times in a business when there is a financial crunch. There may be enormous reasons for a business to slide and nose dive. Factors contributing to such a sorry state at times could be:

You need to pay vendors or suppliers and you are short of funds as your business is low due to many factors, internal or external.

You need to purchase inventory and have no funds with you. Lack of this can cause a slip in your business.

The downward sales of your business may result in a situation where you may find yourself confronted with a situation where you are unable to pay salaries to your employees and you require immediate funds.

You are behind on your loan payments because of shortage of funds generated by your business.

At some point of time where you are behind on your lease or mortgage. In such situations your business requires to be funded. There are many options available to bail out of such a situation.

Bank loans;

Merchant Cash Advance

Borrowing from open market.

Bank Loans: Bank loans are less expensive and are genuine finances with no hidden charges. They have built a solid reputation of dependability and trust. Bank operations are all regulated under a central regulatory body which keeps a check on all the banking operations including bank loans. The rate of interest charged by a bank are also regulated and controlled by the central regulatory body and banks cannot raise interest on loans arbitrarily.

Getting a bank loan is not easy: Agreed that bank’s provide assistance to all, specially the small business entrepreneurs but it is not all that easy to get bank loans.

Longer duration: It takes pretty long time to get a bank loan. It can be anywhere between few weeks to a few months. It involves lengthy procedure, processing with piles of paper work, long intrusive application, documentations etc. At times the procedural intricacies take very long and defeat the purpose for which loans are sought.

Collaterals: Another hurdle in bank loans is insistence of collateral by banks in the shape of a third party guarantee loan, worth the amount of mortgage of property to cover the bank loan. Providing of collateral is always a hassle for the applicant of a loan.

Apart from these banks do not come forward for short term measures like funds required for facelift, paying salaries to staff and payment of installments of existing loans. Banks insistence of loans for purchasing of inventory by drafts and not by cash also is devoid of availing cash discounts on purchasing stock items.

Getting a bank loan for less than perfect credit depends on personal circumstances. If your credit history is not good, banks do not come forward to help you.

Merchant Cash Advance

An alternative to bank’s loan is the Merchant Cash Advance. Where banks are publicly traded investment firms, Merchant cash providers are private investors.

A merchant cash advance is usually more expensive than a bank loan. It focuses more on your business sale history rather than your credit history. If your business has a good and sound track record of credit card transactions you easily qualify for a Merchant Cash Advance.

Procedure: Procedure for a Merchant Cash Advance is that the provider purchases a portion of your future credit card projections at a discounted rate. It is paid back by automatically taking a small percentage of your daily credit card sales until the balance is liquidated. This is very flexible payback schedule because at times when your sales are low, you payback less.

Collaterals: Merchant Cash Advances do not insist on collaterals, a great relief to business entrepreneurs because one it is difficult to manage and most importantly if you fail to pay back. Merchant Cash Advance, no one is going to come after your heir or your property.

Merchant Cash Advance provides relief to your instant problems and you can tide over hiccups in your business endeavors. In these challenging times the business world cannot wait for indefinite and inordinate delay of banks to sanction loans. Merchant Cash Advance provides relief and streamlines that loan process by reducing paperwork and documentation. It usually takes a very short time not more than a week for a Merchant Cash Advance. 

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