When you own your own small business, there are often times when you need cash fast so that you can continue to grow and pay your employees, suppliers, and creditors. You might be tempted to take out a loan with the bank or apply for a merchant cash advance from your credit card processor, but what’s the difference between the two? How do you know which option is best for your small business? How do you find the perfect lender? Below, we break down all of these questions so that you can make an informed decision about which financing route will work best for your business and your financial goals.
The Benefits of a Merchant Cash Advance
A merchant cash advance (MCA) is essentially a loan given to businesses for their processing costs. When people refer to MCAs, they’re typically talking about small-dollar loans ranging from $5,000 to $100,000. In contrast, traditional bank loans fall into higher ranges: $100,000+ may be considered small business financing (as opposed to large business or institutional financing). Traditional loans are given out in exchange for collateral whereas merchant cash advances are not contingent on any form of security–so what do you get in return for not giving up any collateral? One thing is better interest rates than most banks can offer. A larger benefit with MCA’s though is that they aren’t bound by banks rigorous requirements or lengthy processes.
Why Choose a MCA over Other Small Business Loans
Many business owners are taking advantage of cash advances through merchant cash advance programs, or MCAs. If you’re considering an MCA, it’s important to learn how they work so you can decide if one is right for your business. It’s also important to know what sets them apart from traditional loans so you can choose which financing option is best for your small business. Here are three key differences between an MCA and other types of loans:
1. No Collateral Required: Unlike traditional loans where security is required to ensure repayment, most merchant cash advances require no collateral; because your business serves as collateral instead.
2. The Amount You Can Borrow Is Flexible: The amount you can borrow in an MCA will vary depending on factors like your sales volume and industry type. Most lenders have a minimum requirement that ranges from $50,000 to $250,000 but some lenders may offer up to $5 million.
3. Easy Application Process: Applying for an MCA takes only about 10 minutes online. Lenders then use sophisticated algorithms that look at dozens of different variables like sales volume and credit history to determine approval (and potential interest rate). Some lenders even make decisions within seconds based on information submitted through their website alone—no hard credit pull required!
Finding the Right Lender
Working with a reputable source is important. Small businesses must work with companies that have built a reputation for assisting businesses succeed, like United Funding Group. The right lender will be able to take a detailed look at your finances, help you develop a comprehensive plan for repayment, address any concerns or questions you might have about your loan options and provide helpful resources as you get started. Finding an honest and trustworthy partner can help make financing your business much less stressful!
Know Before You Buy, Know Before You Sign
If you’re considering a merchant cash advance (MCA), make sure you know what type of MCA is best for your business. There are two types of MCAs: true-interest MCAs, where you pay back your advance at regular intervals with interest; and no-interest or deferral MCAs, where you do not repay interest until after you have paid off your initial principal balance in full. It’s important to understand how each will affect your business before taking on debt. There are many other factors that go into choosing which MCA is right for your company; shop around, speak with lenders to get pre-approval on an MCA and compare apples to apples when making comparisons.
United Funding Group – Your Partner
United Funding Group provides funding for all types of businesses, regardless of industry. In fact, we provide merchant cash advances for many industries including: retail, service, restaurant, real estate investment. Whether you’re expanding your business or opening a new one, we can get you funded quickly and easily. Contact us today to learn more about merchant cash advances from United Funding Group.