Are you in need of working capital for scaling up your business? If yes, we shall walk you through the two financing options, Merchant Cash Advance and Business Loans. Both of these loan options offer interim funds for small to medium scale businesses. Entrepreneurs can use these funds to purchase equipment, process payrolls, expand operations and so on. Even though both of these options can be used for the same purposes, there are many differences between the two.
Let’s have a look that how merchant cash advance is different from business loan:
Merchant Cash Advance VS Business Loan
How It Works
Lump Sum Advance in Return for a Percentage of Daily Credit Card Sales
Lump Sum Loan in Return for Fixed Monthly Payments
Maturity Date
Variable (Amount Varies Based On a Percentage of Daily Credit Card Sales). Daily holdback of credit card receipts until advance is paid in full
Fixed (Amount is Fixed Based on Principal + Interest). You can repay daily, weekly, and monthly including interest
Average APR
80% - 120%
7% - 60%
Primary Qualifications
Credit Card Sale History and Personal Credit Score
Annual Revenue and Personal Credit Score
Time to Funding
1 - 3+ Days
1 - 3+ Days
Maximum Loan Amount
$5,000 - $500,000 (Typically Up to 50% Annual Credit Card Sales)
$5,000 - $500,000 (Typically Up To 20% Annual Revenue)
Collateral Required
None
Depends on the loan
When to prefer?
MCAs are a perfect option for businesses that leverage a high amount of credit card sales. Here’s when you should go for Merchant Cash Advance:
- You do not want loan on your credit history
- You’ve a seasonal business
- You are an online merchant who
receives high advance amount in return of a small portion of your daily
credit card receipts
Business loans are ideal for businesses which are NOT seasonal (for e.g. food trucks, outdoor adventure business, fireworks retailers, etc.), and do not have high credit card sales. Here’s when you should go for business loans:
- You credit score is good
- You’ve a profitable
business
- You need a large amount of capital
- You are looking for stable
repayment terms
Need any kind of information related to mortgage loan in Twin Cities? Do let us know in the comment section.
