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Small Business Loans Vs. Merchant Cash Advance

Many small businesses today need a solid amount of capital to expand and it is here that many businesses fail to achieve the desired results because they are unable to come up with the required amount of capital.

However, with so many options available for merchant services today, it is not difficult to borrow a lump sum of money and pay it back later. In fact, the industry of lending money is gradually saturating to an extent where competition has led to the generation of new, cheaper alternatives. Additionally, now there are tons of payment options to choose from.

Small business loans and merchant cash loans are among the most used way to come up with capital. The best part is that these borrowed amounts can be paid back via options like credit card processing, customer payments and others.

Small Business Loans

Cheaper than a merchant cash advance loan, these are solid upfront business loans, normally ranging between $5000 and $250,000. Small business loans are like any other loan, made up of scheduled payments and solid terms. The industry of small business loans has grown so much, that there are newer options that allow for convenient small business transactions.

Merchant Cash Advance

A merchant cash advance is an upfront payment, and not a loan. Each day, a fixed amount of money is deducted out of your sales, whether it is through credit card processing or any other medium of electronic payments. Each merchant cash advance service is affiliated with a bank, which means that you can pay back your cash advance by letting the service deduct a small percentage of each electronic payment, which is ultimately collected by a preferred bank.

Small Business Loans Vs. Merchant Cash Advance

The first most prominent difference is that a small business loan is a formal loan, it is from a bank, based on fixed terms and interest payments.  A merchant cash advance is an upfront cash payment. Unlike a business loan, cash advance payments are made as small deductions from daily transactions, however, you can also go for a daily payment plan for your small business loan that allows you to pay back a set amount of money from your bank account every day.

Similarly, you might be able to get hold of your small business loan within a single day but it might take between 8 and 10 days to get your merchant cash advance approved. With so many options around, you can get a small business loan and a merchant cash advance without having to worry about poor credit.  In other words, you can get a solid amount of money as capital for your business even if you have been denied by many banks.

Perhaps the best part about a merchant cash advance is that it doesn’t show up on your personal credit report and no security is required.

These options present great opportunities for different merchant services and they can choose the best suitable option according to their needs.