Small Business Loan Versus Merchant Cash Advance

When  you need cash for your business, your first thought may be to look into your own savings. If you don’t have enough savings, or don’t want to take that risky plunge, perhaps you begin to talk to your family and friends. Still, in this tough economy, everyone seems strapped for cash. So what do you do when all of your options run dry? There are two options that can work for you: a small business loan or a merchant cash advance.


Small Business Loans

Small business loans are a good alternative for accessing an extra line of credit or cash for your business. There are different types of business loans available depending on the bank you choose and even depending on the state you’re in.

  • SBA Loan – There are three main types of SBA Loans — the SBA 504, SBA 504 Pooling Program, and SBA 7(a) Loans. The 504 loans are  designed to provided small businesses the funds to acquire commercial real estate or equipment for expansion and modernization and often require at least 10% down payment from the borrower. The SBA7(a) loans are there to help startup and existing businesses for a variety of business purposes and do not require down payment.
  • Equipment Loan – Just as it sounds, these loans are for those seeking to purchase new equipment for their business.
  • CEDLI Loan – The CEDLI Loan (California Economic Development Lending Initiative) is for California business owner who don’t qualify for the traditional bank financing.

Funding time can take anywhere between 30-45 days and loan terms can range between 5 to 25 years, depending on which loan you receive. With many small business loans, personal guarantees are required.


Merchant Cash Advance

A merchant cash advance allows merchants to receive cash upfront to use for any business related matter. It works very simply: a business will get the cash upfront and then pay it back through their future credit card receivables.

Typically, some of the minimum requirements include:

  • Being in business for at least 1 year
  • Process credit cards for at least 4 months

With merchant cash advance, there are less stringent requirements when compared to conventional business loans. For example, personal guarantees aren’t usually required nor is good credit. Further, funding can take up to as little is one week.

Both the small business loan and merchant cash advance provide opportunities for business to obtain working capital from a wide range of amounts. To learn which one is best for your business, goals, and financial situation, contact one of our funding specialists at 1-800-722-4476.

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