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Business Loan Vs Merchant Cash Advance. Which One To Choose?

Businesses looking for access to capital face a basic choice between a business loan and a merchant cash advance. Both business funding options can help you hire new employees or finance a major marketing campaign, expand your business or just get out of a cash flow crisis. Which one to choose?

Business Loans

Businesses loans are designed for businesses and not individuals. They have a fixed term and agreed interest rate. Business loans have traditionally been popular among business owners because they offer the following benefits:

  • As compared to a merchant cash advance, a business loan is cheaper and offers interest rates that are usually in single figures.
  • You should repay your loan on a fixed monthly basis, which makes budgeting and forecasting easier.
  • A business loan offers fixed final repayment schedule beforehand. You will also know when you will have extra cash on hand.
  • You can make early repayments; however, you should be careful not to be penalized for an early payment.

Merchant Cash Advances

A merchant cash advance differs from a business loan in the following: the merchant cash advance provider purchases part of future credit card sales by providing cash in advance and then reclaiming a percentage of your card receipts. You get no fixed term for the advance repayment. You just agree on the amount upfront and the percentage that will be taken from your sales.

The company will continue to take the percentage from your sales until you repay the amount and the transaction fee you’ve agreed upon. Remember that a lower percentage doesn’t mean you’ll have a lower cost for borrowing. So you shouldn’t draw a parallel between this number and an interest rate. A merchant cash advance has the following benefits:

  • If you have a bad credit history or poor track records, you can still be approved for a merchant cash advance.
  • You should repay based on your sales. So unlike a business loan, the amount you repay will be based on your sales.
  • You won’t have a fixed schedule, meaning you should continue to pay the percentage to the merchant cash advance provider until you pay the debt.

If you’re on the lookout for business funding, it’s critical to turn to a reliable finance company like First American Merchant. FAM offers the lowest possible rates and the best business funding opportunities in the industry. Turn to FAM for its popular merchant cash advance.

Access to business capital is necessary for your growth and expansion. Take the time to research all the available options and make the right choice for you and your business.