Merchant Cash Advance vs. Small Business Loan

During your first years of operation, there are a number of financial issues your small business might run into. More often than not, you will be experiencing trouble with your cash flow. When your company does not have access to working capital, it can easily create problems for your ability to cover the basic costs associated with maintaining your operations. Luckily, there are some services worth considering to help your business out of a bind. Services like a small business or merchant cash advance can both offer benefits to your company.

SBA Loans

To get started, it can be helpful to explore how these options work. A small business loan also referred to as an SBA loan, is a form of financing specifically structured for the needs of a small business. This type of loan is released by the Small Business Administration in order to help bolster the economy and provide business owners with opportunities to get ahead. To qualify for this loan, you need to have a decent credit score and be able to show lenders a solid business plan detailing how you will use the funds.

Credit Advance

A merchant cash advance, on the other hand, is slightly different as a financing option. When your company handles a number of credit transactions in a given month, then this might be a preferable service for your company. A company that specializes in this type of financing will look over your projected credit earnings in the coming months and offer you an advance on your earnings. Since the advance you receive is based on future earnings, your repayment schedule is built into the terms of the loan. If you qualify, this can be a great option to consider.

Key Differences

While both of these financing services can be beneficial to a small business, you want to take time to think about which is the better fit for your needs. If you do not handle any credit card transactions on a regular basis, then an advance probably won’t be helpful. Similarly, an SBA loan is only going to be a good fit if you meet the qualifications set forth by lenders. Understanding what is expected of you can help you determine which option is best.

There are many different paths to consider taking when you are running a small business. When you need assistance with your finances, be sure to explore all of your options. Determine whether a merchant cash advance or SBA loan is right for your needs and see how you can get started.