Misconceptions abound regarding merchant cash advances in relation to small business loans. The two contrast one another drastically, and frequently not in the manner a small business owner might expect. Ultimately, small businesses will require a cash reserve or additional funding in order to maximize their growth potential and increase their profits.
Small Business Loans
Small business loans are offered by banking institutions and are available to small business owners seeking a new funding source. The complication for small businesses arise in the strict guidelines banks follow regarding credit scores and business documentation.
Bank loans also feature complicated contracts that can be difficult to process and understand for small businesses. These fixed contracts often lack flexibility regarding slow retail months with static payments that can strain a small business. Finally, should the bank finally grant you a small business loan, the time necessary for processing and for the funds to become available to you can take longer than a small business can wait.
Merchant Cash Advance
Contrary to common perception, merchant cash advances are not short-term high-interest loans. A merchant cash advance is when you purchase your future profits from a 3rd party and then provide them a percentage of subsequent profits until the amount provided is paid off. Unlike loans, merchant cash advances do not require credit scores or extensive tax documentation regarding your business. They’re also fast, sometimes only requiring 24 hours for a merchant cash advance.
Because of a payment system that is dependent on the sales of your business, you are guaranteed to pay back your advance at a rate that mirrors your business’ revenue. Through an automatic percentage of all credit transactions this automated system provides your business with the easiest, fastest access to a lump sum of working capital.
Small business loans rely on a credit-based economic system which can often stymie high-risk small businesses from the beginning, crippling their growth. Through alternative sources of funding, such as merchant cash advances from First American Merchant you can unlock your business’ potential from day one through flexible working capital.