Are you looking outside your company for additional working capital? Any business may need financing to improve cash-flow problems or for other purposes at some point in time. This article will help you draw a parallel between 2 popular types of business financing, a merchant cash advance and a loan.
Merchant Cash Advance (MCA)
First of all, remember that an MCA isn’t a loan. A merchant cash advance was originally called to serve as a lump sum payment that business owners could obtain in exchange for a set percentage of their future credit/debit card sales.
One of the top advantages of an MCA is that it eliminates the need to go through a lengthy approval process. Also, providers don’t put forward strict credit requirements, thus making it a great option for high risk merchants. Let’s see what else an MCA offers:
- The maximum amount you’ll receive varies from $2.500 to $250.000.
- You may be required to repay on a daily basis through your merchant account.
- Usually, the repayment term is 8-9 months.
- Rates are higher as compared to other financing options, but you can turn to a trustworthy alternative online lender like FirstAmericanMerchnat.com to get easily approved for the cheapest possible fees and the best possible terms in the space.
FAM is an award-winning high risk business funding provider and processor that carries an A+ rating with the BBB. FirstAmericanMerchant.com is dedicated to offering unmatched business funding opportunities to both low and high risk merchants interested in a merchant loan. Consider FAM’s popular cash advance.
Merchant Loans
Think of a merchant loan as any type of financing associated with the borrowing of funds and repaying them in full. Let’s look at some specifics:
- The costs being charged are calculated based on interest rates, with the rate determined on an annualized bases.
- As a rule, repayments are made each month: prepayment penalties may be applied.
- Generally, the rates vary from 6-20%, and the terms are between 1-25 years.
- Credit and revenue requirements are stricter as compared to MCA requirements.
To sum up, having sufficient funds for your business is critical to your success. Being able to choose the right type of financing is no less critical. So, work only with a respectable provider to get the best deal.