How Is A Merchant Cash Advance Different From A Loan (And Why Is It Better)?

If you are doing a business you will need to take a loan at one point. Some people take a loan to start a business and some people need the money to expand the business or buy inventory. Whatever the reason may be getting a normal loan from the bank can be difficult. You need to meet various requirements. Not all businesses also get approved for the loan due to bad credit reports.
Merchant cash advance gives the opportunities for businesses to get a loan quickly without many formalities. This helps them in resolving their cash challenges and move the business forward. Here are some differences between a merchant cash advance and a normal loan.
Easy requirements
It takes less effort for the merchant cash advance to get approved. Only certain criteria must be met. Credit checks are performed but there is no strict requirement. So, even if you have default payments you will still pass the credit checks. In a normal loan, this is not the case. The credit check is a vital part of the loan process and if there is any bad credit report then you won’t be approved for the loan. There are also other requirements that you need to meet.
Fast processing
Processing the merchant cash advance takes very little time. Once approved it will take only a few days to get the money. But normal loan processing takes a long time. Even after approval, you may have to wait for a long time due to various formalities and paper works. So, it will take a long time to get the money.
Collateral
In a normal loan, you need to have collateral to prove that you are capable of repaying the amount. The collateral can be in the form of savings or assets like land. Every business owner can't show proof of fund or asset. So, they often do not get approval for the loan. In the case of the merchant cash advance, this is not a problem as no collateral is needed. However, you need to show proof that you will have constant sales on credit cards every month based on which you will repay the amount you have borrowed.
Repayment policy
In the case of a normal loan, you need to repay the amount along with the interest rate. This rate varies from one bank to another and business owners try to find a bank with the lowest interest rate. You have to pay a fixed amount every month. In the case of the merchant cash advance, you don’t need to pay any fixed amount. You should pay according to the credit card sales. So, even if you have low sales in a particular month you won’t have to worry about it. You will not fall behind any repayment so your loan amount won’t increase like that of the normal loan.
As you can get fast approval, quick processing, flexible repayment policy, and no collateral loan, the merchant cash advance is better than the normal loan. So, next time you get into trouble due to a lack of money, you must apply for the merchant cash advance instead of the normal bank loan.