Does Merchant Cash Advance Have Benefits Over SBA Loan?

Are you troubled that the tightened restrictions on bank loans after the global economic slump will hurt your business finances? Are you unsure whether risky Small Business Association (SBA) loans will cause more problems than solve issues for your business? Do you think Merchant Cash Advance (MCA), also called business cash advance, can be a potential funding alternative for your business? Are you unable to decide between SBA loans and MCA? If yes, then read on to find out which option is a better fit for your business and can give it the capital needed to make progress and thrive.

Review the points discussed below when weighing the pros and cons of SBA loan and MCA.

Required Financial Documents

If you are a well established company, SBA lenders will expect you to produce records of current arrears, outstanding balances, and payment schedules along with available collateral that can be offered to the bank. Startup business owners have to furnish a business plan that reveals monthly cash flow projections for the starting two years when submitting a request for an SBA loan. Your eligibility will be further assessed by analyzing credit card arrears, liquid capital, personal loans and monthly statements, tax documents, and holdings of real estate.

Merchant cash advance providers ask you to provide only two documents along with your application. These are monthly credit card processing receipts and longevity of the business. These two factors by themselves will qualify you for merchant cash advance and also help decide the amount of the advance.

High Approval Rate

Banks are wary of loaning money. The SBA is only the loan facilitator. Your loan will be approved only after convincing the banks or brokers of your potential to pay back the loan. The high volume of financial documents required coupled with the lender’s caution lessens the chance of your SBA loan request being approved. The financial slowdown has made it even more difficult to procure SBA loans.

MCA providers, on the other hand, evaluate only your your monthly credit card sales and the number of months the business has been running. Another advantage compared to SBA loans, merchant cash advance rules do not accept low FICO and past bankruptcies as denial criteria for the application.

Repayment Flexibility and Lower Risk

SBA loan does not allow you to make changes in repayment terms once it has been processed. The payback schedule is fixed and incurs heavy penalties on breach. Banks may cease and sell off your business assets. The same can also happen to your private assets including your home and car can be seized in case of failure to pay the loan, thus making SBA loans very dangerous in an economically fragile environment.

Merchant cash advance comes with a flexible settlement plan. Each month you are obligated to pay a fixed portion of your credit card receipts to the provider. When your sales are thriving, you pay more. When your business is going through a lean sales phase, the repayments reduce in amount and don’t become too burdensome. The possibility of failing to pay is very small.

Merchant cash advance hits margins but is less {risky~safer}

MCA repayments cut into your profits a bit. However, not being able to repay SBA loans proves disastrous as it can mean the end of your business’s existence. Merchant cash advance is a superior, low risk, and flexible financing alternative relative to SBA loans. Protect yourself from potential trouble by ensuring you understand the benefits of MCA before filling your SBA loan application.