Operating a firm is not easy, whether it’s a startup or an old company. You have to track the sales and profits, your employees’ performances and so on. On top of that, you don’t get to enjoy the weekends since you still need to do your job. Otherwise, you won’t reach your monthly quota.
But there are times when you experience financial problems in your business. Still, you need to keep it running to sustain your family’s or employees’ needs. In times like this, you need to have a backup plan.
Some small-time business owners will approach the shark lenders to borrow some money. Others will go to their relatives and friends and ask them if they could lend them some cash. There’s nothing wrong if you approach these people since they will give you the amount you ask. But if you didn’t pay them on time, you will experience either of the following circumstances:
- Shark lenders will hunt you like you are a criminal.
- It will ruin your relationship with your family and friends.
Fortunately, you can escape these situations. You just need to get a merchant cash advance or a bank loan. Both can finance your company. However, they can also bring up some concerns. This article will discuss the pros and cons of both finances. It will also help you decide which solution you should choose. So without further ado, let’s begin the discussion!
Pros & Cons of a Merchant Cash Advance
A merchant cash advance is a go-to solution for many small-scale entrepreneurs today. It helps you finance your future deals and receive funds quickly. Furthermore, it can be a great answer for various circumstances.
But just like any product, MCA is not perfect. There are setbacks that you may experience if you choose this financial help. One of the disadvantages is the cost. Compared to other monetary solutions, the business cash advance is far more expensive. It’s because of the additional fee. This extra charge ranges from 9% to 50%. However, the added rate depends on your merchant cash advance loan provider.
For example, you borrow $100,000 from a business financier, and this company applies a 1.25 rating. To know how much you have to pay; you need to multiply the amount you borrowed by 1.25. Hence, 100,000 x 1.25 = 125,000. Therefore, the amount you need to pay is $125,000.
Another setback is the shorter period. Some people take it as an advantage because they don’t need to worry about paying the company for years. Others consider it as a nightmare since they only have a short period to pay the company.
Thus, if you’re planning to get merchant loans, you need to analyze your situation first. Make sure it can solve your financial problem, and you can give it back. Otherwise, it could make things even worse.
Lastly, it can be a risky move. Whether or not you’re an expert in business, you can’t predict what lies ahead of you. You will never know if you get higher sales next month or not. Thus, some people don’t recommend getting a merchant advance. However, it’s your decision if you want to take that risk. After all, it’s your company. If you think that it can solve your financial problem; then get this loan. However, if you have doubts, then it’s best to trust your instinct.
However, getting this loan doesn’t mean that it’s all about taking risks. There are also advantages that you will get from it. First, you can get the cash quickly. In just a few days, you can use the borrowed money for your business, making it a perfect solution.
Another advantage is the access. What makes it better than other loans is that they don’t need to do a background check. Moreover, you don’t need to gather numerous files and documents to prove your eligibility. You just need to submit your bank account statements, government ID, and the application to the finance company.
Credit is also not an issue in MCA. Generally speaking, loan providers ask for your credit score. If the financier sees your low credit rating, chances are they will deny your request. Consequently, you have to look for another lender who can give you the money that you need.
However, if you get business cash advance loans; you don’t have to face this situation. Yes, they also ask for your credit score. However, it doesn’t hinder you to get the money that you ask. In fact, it’s just a formality since they base their decision on the performance of your company.
This solution is perfect for those who have low or no credit scores. They can get it without worrying about their credit history.
But the best thing about this financial assistance is the absence of collateral. Usually, bank loans ask for collateral if the borrower fails to pay the money. It could be your car or your home, depending on the amount of cash you borrowed.
However, if you choose to get the merchant cash advance, you don’t need to put your property at risk. Hence, you still have a place to live or a car to drive even if you missed the deadline.
Nonetheless, there are two requirements that you must fulfill. First, you must have a good sales record. Lastly, you need to have a great potential for your future deals. If you meet these requirements, there will be no problem.
Advantages & Disadvantages of Bank Loans
Apart from merchant cash advances, you can also get bank loans. As the name implies, these are funds that you get from the bank. You need to go to your chosen bank company, submit your requirements, and wait for their approval. Once you get the money, you can use it for paying other debts, buying equipment, etc.
There are several benefits that you will enjoy if choose to get loans from the bank. One of the major advantages of this type of loan is the flexibility. You can use the money you borrowed for your business, your children’s education, and so on.
Apart from that, it has lower interest rates. No wonder why some business owners choose bank loans than cash advance for businesses.
Another benefit is the speed. Back in the days, getting bank loans would take days. You needed to meet their requirements, gather the necessary documents, and wait in line to apply.
It all changed when the Internet arrived. The process is now faster. On top of that, you don’t need to visit the nearest finance company. You just need to go online and visit their website. Submit the requirements and wait for their approval. Once approved, you can withdraw the money in any ATM outlet.
However, there are also setbacks that you will face if you choose this financial assistance. First is the difficulty of getting their approval. Bank loans usually look for the applicant’s credit score. It’s where they base their decision whether or not you’re likely to get this loan. So if you have a low credit score, this may not be the best option for you.
It can also affect your credit rating. For example, you borrowed $50,000 from the bank. If you fail to meet their deadline, they will give you a low credit rating. Moreover, the interest rate will continuously increase, making it impossible to pay them.
But the primary concern is collateral. Banks ask for a pledge. It’s to ensure you pay your debts on time. If you fail, the company will foreclose your property. Consequently, you will leave nothing to your family.
Making the Right Decision
As you can see, both have respective pros and cons. Your choice lies in your decision. Nevertheless, you need to research to find top merchant cash advance loan providers or banks. That’s the only way you can get the most out of your loans.
However, you need to determine the amount of money you need to borrow. You also need to weigh the pros and cons of two financing options. When you’ve made a decision, you can start your research.
Go to review sitesand read reviews of merchant cash advance loan providers. These opinions will help you decide which one you should trust. You can also look at their list. You may visit their official websites to get more information about the firms.
When you’re done researching, you can finally decide which company you should trust. Hence, you will have no regrets since you know that you can trust them.
Experiencing financial issues in your business is not a laughing matter. There are many things at stake. If you don’t solve the crisis immediately, your company will fail. Thus, there are MCAs and bank loans, which are ready to help those who are in need. You just need to meet their requirements to get the funds.
Are you looking for the right loan provider of MCA? Go to CrowdReviews.com and read their reviews of merchant cash advance companies.
Keith Moore
Latest posts by Keith Moore (see all)
- What Is the Best PoS Software and How to Choose It? - January 12, 2017
- What Does Database Management Software Do for Small Businesses? - January 9, 2017
- What Are the Distinct Features of the Top App Development Software? - January 8, 2017