Small Business Term Loans Vs. Merchant Cash Advance: Which is Best? What are the pros and cons of both.
Fresno, CA -- (SBWIRE) -- 12/08/2015 -- Biz4loans a Fresno based Small Business Financing company gives insights into Pros and Cons of Merchant Cash Advance and Small Business Loans.
A Merchant Cash Advance is a fast and easy way to get small-business financing. In fact, it may be too fast and easy. Rather than quickly opting for an Merchant Cash Advance, you should pause to consider whether a Merchant Cash Advance is your best — or only — option.
A Merchant Cash Advance is not a loan but an advance against future credit and debit card sales. You pay it back daily by sending a set percentage of that day's card sales directly to the lender. The annual percentage rate is 70% to 350%, much higher than small-business loans from banks or online lenders.
And if you're not careful, one Merchant Cash Advance can lead to another and another, creating a debt spiral that can be hard to stop.
The Merchant Cash Advance dilemma: speed vs. cost
Merchant Cash Advance providers stress the convenience and speed. Biz4loans, a leading provider of Merchant Cash Advances, says the financing is "cash-flow friendly."
"You don't have to worry about fixed monthly payments during tough times, and there is no set maturity date," the company says.
The flexible repayment does make Merchant Cash Advances an attractive option for some small-business owners, says Shruti Negi, Sr Marketing Manager of Biz4loans, which helps entrepreneurs set up a small businesses.
"The cash advance traditionally fluctuates directly with the merchant's sales volumes," she tells "This gives a business owner flexibility with which to manage their cash flow, particularly during a slow season. When business is slow, the money withdrawn decreases, and increases during busier times."
But that convenience, other experts tell Biz4loans, is offset by a potentially huge risk: If you don't plan ahead, a Merchant Cash Advance could lead you into a debt trap.
"While they are fast and easily accessible, their short, short duration and very high effective rates drive many small businesses into downward cycles of re-borrowing," Pradeep Bali , founder of online lender Biz4loans. "They take out more and more debt to roll over their repayment obligations."
The comparison between the two can be given as follows:
Merchant Cash Advance vs. Bank Business Loan
Like a bank loan, a merchant cash advance provides a lump sum of money when your business needs capital.
But the financing alternative is technically not a loan.
Merchant cash advance providers are not subject to the state and federal regulations that apply to banks. Rather than making loans, merchant cash advance providers purchase future receivables at a discount. You give the discount in exchange for the quick access to cash. In subsequent months, every time you make a credit card sale, a portion of the revenue is forwarded to the provider until the entire amount has been repaid.
Merchant Cash Advances and Bank Loans: How They Differ
Here are other ways in which a merchant cash advance differs from a bank loan:
Less paperwork. The process of getting a merchant cash advance is quicker and far less onerous than a bank loan. Typically you get cash in less than a week.Higher approval rates. You must show a track record of debit or credit card receivables to qualify. Many business that cant qualify for a commercial loan can qualify for a merchant cash advance.No collateral. You do not have to put your assets, such as your home, on the line as collateral for a merchant cash advance.No use restrictions. You can use the money any way you choose.
No fixed payback schedule. You repay the cash advance according to your sales. If business is down, your repayment slows.Merchant Cash Advances Pros and Cons
Critics note that merchant cash advances are more expensive than bank loans. Yet in today's tightened credit market, commercial bank loans and credit lines are difficult to come by, especially for small retail businesses and restaurants. Merchant cash advances are sometimes the only alternatives for businesses to solve cash flow problems or get the money they need to expand.
About Biz4Loans Merchant Cash Advance
Biz4Loans is a California-based company with an exciting new way of quickly closing commercial loans for businesses small and large. With a customer-centric focus and a high standard for quality service, we embrace new technology to pass cost savings on to our business clients. Entrepreneurship Advocates "Entrepreneurship is living a few years of our life like most people won't, so that we can spend the rest of our life like most people can't. " – Anonymous We believe entrepreneurship to be one of the most rewarding journeys that a person can pursue and that no two entrepreneurs are the same. Some seek a better life for themselves and their families while others take on the risk in pursuit of independence. Whether it is a small town where everyone knows each other or a big city that never sleeps, every community relies on entrepreneurs to create and provide jobs and to usher in new possibilities. At Biz4Loans, we understand the challenges that entrepreneurs face in financing their venture. We also understand that a startup entrepreneur frequently has to wear many different hats while her company is getting off the ground. This is why we provide a quick, convenient, and detail-oriented process that achieves results without unnecessary delays or obstacles.
Growing the Business Community commercial loan brokers Whether it is financing to cover initial start up costs, purchasing of new equipment for an existing business or an expansion of facilities, Biz4Loans can help. We know that sometimes unexpected costs as well as unexpected opportunities require quick and decisive action. Our ability to quickly close a wide variety of loans has allowed us to build strong relationships based on our reputation for serving our clients effectively. Because of our speed and adaptability, Biz4Loans has brokered over $500 million in funding to businesses ranging from farms, hotels, and non-profits to office buildings, surgical centers and apartment complexes.