What Is Better, Merchant Cash Advance Or SBA Loan?

Are you worried that the tightened restrictions on bank loans post the global economic slump will leave your business short of cash? Are you unsure whether risky Small Business Association (SBA) loans will be more trouble that its worth and not solve the financial issues of your business? Have you given thought to Merchant Cash Advance (MCA) , also called business cash advance, as a likely financing alternative for your business? Are you finding it difficult to decide between SBA loans and MCA? This article can help you decide which option is better for your business and can give it the resources required to grow and thrive.

Study the points discussed below when comparing the pros and cons of SBA loan and MCA.

Required Financial Documents

If you are a long established business, SBA lenders will expect you to produce records of current debts, loan balance, and payment schedules and available collateral that can be offered to the bank. Startup companies must attach a business plan that included details of monthly income projections for the initial two years when submitting an application for an SBA loan. Your creditworthiness will be further assessed by analyzing credit card liabilities, liquid capital, personal loans and account statements, tax returns, and property holdings.

Merchant cash advance providers ask for only two documents while filing your application. These are monthly credit card processing receipts and longevity of the business. These two factors by themselves will determine your eligibility for merchant cash advance and also help determine the amount of the advance.

Good Approval Rate

Banks are very watchful in loaning money. The SBA is only a mediator. Your loan will be processed only if you can convince the banks or brokers of your potential to pay back the loan. The high volume of financial credentials expected coupled with the lender’s watchfulness reduces the chance of your SBA loan request being approved. The financial recession has only added to the challenges of SBA loan applicants.

MCA providers, on the other hand, only verify your average credit card sales volume in a month and the number of months the business has been in operation. Another advantage compared to SBA loans, merchant cash advance providers do not treat low credit score and earlier bankruptcies as rejection criteria for the application.

Repayment Flexibility and Little Risk

SBA loan does not allow you to make changes in repayment terms after receiving it. The payback timetable is fixed and incurs grave penalties on breach. Banks may cease and auction your company assets. Even your individual assets including your home and car can be seized in case of loan default, thereby making SBA loans very perilous in an economically fragile environment.

Merchant cash advance offers a business friendly and flexible repayment plan. Every month you are required to pay a predetermined portion of your credit card receipts to the provider. Your repayment amounts vary as when your business is flourishing, you pay larger sums. When your company faces the heat, the repayments reduce in amount and don’t become too burdensome. The risk of failing to pay is quite negligible.

Merchant cash advance hits profit margins but is safer

MCA repayments do impact profit margins to some degree. But on the other hand, defaulting on SBA loans proves disastrous as it can mean the closure of your business. Merchant cash advance is a more desirable, less risky, and flexible financing choice as compared to SBA loans. Protect yourself from potential difficulty by ensuring you understand the advantages of MCA before trying for an SBA loan.

Incoming search terms:

• merchant cash advance association uk

Be Sociable, Share!

•