Difference between Merchant Cash Advance and a Small Business Loan


Business loans take an underwriting process that takes time before the loan is processed. It can either be denied or approved. The funding bank requires documentation such as financial statements, personal tax returns and business returns depending on the size of the loan. If the underwritings favor the businesses owner, then the business owner is eligible for the loan and has a good credit score.

The interest rates for the business loan are fixed and will usually take three to ten years repayment period. The business owners can, however, request for a longer payment period in form of extenuations or renewals depending on their repayment schedule so as to hit the maturity date.

The funding institution will, however, require collateral which is in form of assets or property. However, there are express types of loans do not require a collateral because they are based on personal guarantee and business owners credit. As such, the rate is higher than the other loans and processing can take three to five days.

The merchant cash is convenient and processed much faster than the business loans. The business owner must have a merchant account for the transactions since the loan is based on the credit card volume. The approval is done within 24 hours and the funding within 72 hours since there is less documentation required.

The repayment terms of the merchant cash advance are dependent on the terms of the loan. It is a short-term solution for purposes of upgrading, inventory, temporary cash flow, and expansion.

Collateral for this type of loan is different to the business loan. The documentation is limited therefore the financing is much quicker. The approval is based on the monthly volume the owner of the business does monthly in the credit card transaction. The business owner agreement on the use of the future credit card sales to repay the loan is the only collateral required for the loan.


Back to Top