Different sources of borrowing charge you different costs. A cash advance fee always comes along when you choose to seek out a source of finance. There is a cost associated with each and every loan facility that a business organization undertakes, whether it is for meeting the working capital requirement or for any other purpose. Whenever you go for a cash advance, you have to pay a cash advance fee.
If a small business is looking for Merchant Cash Advance (MCA), then the cash advance fee to be paid by such a business is a fixed proportion of future sales of credit cards or debit cards made by the business. The benefit here is that the amount will only be deducted when the firm is able to make revenue. Merchant Cash Advance providers give you a loan on a quick basis that is within a few days from approving the application. Additionally, Merchant Cash Advance is beneficial as it offers flexible terms to small business enterprises.
Benefits of Merchant Cash Advance Over Banks
1) Charges to bear
If you go for SBA loans for the purpose of financing, then you should know that these type of loans offer to fund for purchasing equipment and working capital. They offer you financial assistance even for expanding and acquiring a new business. However, these loans come with interest rates ranging between 6% and 9%. Banks also ask for personal credit score, which should not be less than 681 to become eligible for an SBA loan.
On the flip side, Merchant cash advance has a very low cash advance fee. Small business owners can opt for Merchant Cash Advance without worrying about its fee structure and other heavy charges, unlike an SBA loan.
2) Qualification criteria for companies
Only sound companies can qualify for bank loans and they should not have any bad credit record. Banks don’t give funds to companies, which have any stain on their financial statements. On the other hand, MCA gives a loan to all kinds of small companies, even if they have a bad credit.
On the other hand, Merchant Cash Advances do not have such a strict criterion for granting cash advances to businesses. They put forth only one condition in order to qualify for the loan and that is the small business should be ongoing. These finance structures. This form of loan is the most flexible and reliable for small merchants compared to any other loan.
If a small business is looking for a cash advance but is reluctant to go ahead for it because of bad credit, then MCA is their hope. If you are having hopes for a bank loan with bad credit, the chances are nearly impossible.
3) Application process
There are many formalities that a company has to go through in order to get a loan sanctioned from a bank when they apply for bank loan.
On the contrary, an MCA has a very simple and easy application process. First of all, there is minimal paperwork and once the loan is approved, then the loan amount gets transferred to the bank account of the small business shortly.
Hence, if you want to go for a cheap option to acquire finances, MCA is the right match for you. It is the cheapest and quickest source of funding made available to small businesses. Additionally, it’s cash advance fee is also reasonable.