Is your business in a pinch for cash? You might be comparing and contrasting all of your financing options. You could head to the bank to apply for a traditional loan, but you shouldn’t limit your thinking to just that. Merchant cash advances, which are often simply called MCAs, are a viable choice for many businesses that are in need of some extra moolah. Take a look at this brief comparison between MCAs and regular bank loans.
Getting Approved Is Easier With an MCA
If your business’ credit history isn’t the cream of the crop, you might find it difficult to gain approval for a traditional bank loan. Banks often have strict guidelines that dictate whom they can lend money to.
Merchant cash advances, however, are generally easier to get approved for than regular loans. As long as your business accepts debit and credit card payments, it’s likely that you’ll get approved for an MCA. This is because with an MCA, you automatically pay a portion of debit and credit card sales toward the loan. The lender can rest assured that the chances of you not being able to repay the loan are relatively low.
MCAs Offer Flexibility
If you’ve ever gotten a loan from a bank before, you know that a specific amount is due month after month on a certain date. If you deviate from that arrangement, you could be slapped with heavy fees.
With a merchant cash advance, the amount you pay each month is based on your business’ debit and credit card sales. When your business performs well, you pay more. When times aren’t so good, you pay less. The loan payment will always stay within your budget.
You Know What to Expect from an MCA
When you take out a bank loan, you might be worried about APRs and final payoff amounts, and you could even feel pressured to pay the loan off as soon as possible so you save on interest.
All of that complicated stuff goes out the window with MCAs. When you first take out an MCA, you’ll know your final payoff amount. Paying off the loan early has no advantages. You’ll enjoy the simplicity of being informed from the get-go.
An MCA Does Not Require Collateral
Bank loans may require collateral in the form of your business or personal property. Failing to make payments on the loan could result in significant loss for you. Merchant cash advances are unsecured loans so you’re less likely to lose precious assets.
Is better to choose an MCA or a bank loan? Every business’ situation is different, but merchant cash advances should definitely be on your list of things to consider.
- Financing Blog (24)
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