What is the difference between a business loan and a merchant loan?

From the outside it looks pretty much the same; a business needs money, they fill out some forms, get the cash, then pay back the loan. But that is where the similarities end.

Traditional Small Business Loans

For a traditional business loan from the bank you will need to bring the following; a business plan, business tax returns, personal tax returns, business guarantees and collateral. If they do approve the loan (and I stress if) you will need to wait 4-8 weeks and then you are limited to what you can spend the money on.

Once you receive the money you need to start paying it back. Typically this is a set amount that you write a check for every month.

Business Cash Advance

With a business cash advance all you need to do is show that you’ve been in business for six months and have credit card receipts for at least $3,500 a month for those months. There is no collateral, and no fees.

You pay back the cash advance by using a percentage of your daily credit card sales until it is paid off. In most cases this is less than 10% of your gross sales. Because you use a percentage of your credit card sales; if your credit card sales for the day is slow, you pay back less. There are no bank loan repayment statements, no fixed monthly payments, and no penalties for late payments. Repayment occurs automatically and follows your business revenue flow.

Which should I choose?

Typically a small business loan is less expensive than a business cash advance. Under normal circumstances I would suggest getting a business loan. There are times however that a business cash advance may be the best alternative;

How fast do you need the money?
As I have stated, a business loan takes up to 8 weeks while a cash advance usually takes less than 10 days.

Do you feel comfortable with using your home or business as collateral?
While a business loan requires some form of collateral, a cash advance does not.

How is your credit?
For a traditional small business loan, banks will scrutinize not only your business credit, but your personal credit as well. They will typically go back several years into your credit history.

The most important decision making factor with a merchant cash advance is your credit card sales. If your business shows a steady flow of income through your credit card sales, you are much more likely to get the cash you are requesting.

Learn more about merchant loans

Here are a few articles that will give you a better understanding of business cash advance;

Small Business Loans

Full Name:

Phone Number:

Fax Number:

E Mail:

Business Start Date:

Type of Business:

Accept MasterCard/Visa?

Monthly Credit Card Sales:

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