Understanding the Difference Between Small Business Loans and Merchant Cash Advances

April 16, 2019 9:03 am Published by Leave your thoughts
Businessman counting money

Running a startup or a small business is not an easy job to do- given the fact that you always have to put your customers first. Customer is king and will forever remain so, but there is a whole world of business affairs that lies beyond customer satisfaction. To achieve customer satisfaction, you need to assure that the world beyond it is functioning perfectly.

Inventory restocking, upgrading equipments, paying employees on time, and managing daily operations without a hassle are all tasks that you have to do behind the curtains. While meeting customer expectations is the ultimate target, it is your efficiency in running day-to-day operations that makes your business successful.

Once you enter the world of entrepreneurship, you’ll start to appreciate the truth in the old adage ‘you got to spend money to make money.’ In the literal sense, investing money helps you raise more money and achieve customer satisfaction. However, when you run out of cash in hand, you are stuck at a cul-de-sac.

How can you keep your business afloat when you’re facing liquidity crunch? The odds are against you and you’ll somehow have to compromise on the end goal of customer satisfaction. You won’t be able to pay employees on time, which will result in disruptive behaviors and reduced efficiency. Orders will get delayed, and your customers will begin to doubt the sincerity of your business and its commitment towards client satisfaction. Even if you’re serious about servicing your customers and meeting their needs, you’re already facing a bad rep from your customers and your depleting cash reserves are not making things any better.

However, this isn’t how the world of business works. To every problem, there is a solution or a way out. The solution could lie internally or could be achieved through external means, but there is always a reliable solution available. When it comes to liquidity crunch, startups can avail small business loans and merchant cash advances.

These two forms of funding can improve your cash flow position and provide you with the funds needed for your business operations. Think of this money as the lubricant your business engine needs to continue performing with great efficiency.

Here we discuss these two types of small business financing in detail to help you differentiate between the two.

Small Business Loans

If you’ve been operating as a small business for a year or two now, we’re sure you must know of these loans. Small business loans are among the most convenient options for small business owners. Small business loans can either be acquired from a bank or from an online lending agency.

Banks are obviously more particular about the loans they approve. Your application could be rejected for the most trivial of all reasons. Let’s just say the bank has a minimum requirement to approve the loan only for businesses with a revenue exceeding $5,000 every month. Your small business has been doing so consistently for the last six months, besides just one month in between. The bank can reject your application on the basis of that one month where you failed to meet the $5,000 requisite.

Feeling rather embarrassed after being rejected by the bank, business owners look for lenders and agencies online. That is where most small business loans find success. Online lenders follow an easy method of qualification and approval. Most of the requisites are still intact, but there is less focus on your credit score and a lot of the intricacies are avoided. Simply put, banks are on the lookout for reasons to deny you the loan, while we are looking out for reasons why to approve your application. There is a world of difference between the two approaches, and we’re sure ours sits better with small business owners.

So, small business loans act as a source of life for businesses during a liquidity crunch. They are available through traditional financial institutions as well as contemporary lending agencies.

Merchant Cash Advances

Most small business entrepreneurs don’t know much about these cash advances. Instead we doubt whether a majority of the entrepreneurs know anything about these cash advances. Merchant cash advances are usually provided by online lending agencies that understand the complex situation you’re going through and give you a cash advance in return for a purchase of future card sales. No collaterals are exchanged, and your credit score is barely even brought to the picture.

You can approach First Down Funding for a merchant cash advance during a cash crunch, and can talk the details through with us. We will give you the financial assistance in exchange with a purchase of your future credit card sales.

Find the repayment process rather hard to understand? Well, what we do here is to hand over cash reserves to you during a crunch. You don’t have to give us back the amount in the form of fixed payments or percentages within a specific period. However, you can repay the loan through the credit card sales you make in the near future. The cash will immediately injected within your business, while you can conveniently pay back the loan with the credit card sales you’re making. Thus, unlike other loan options, a merchant cash advance doesn’t put you in another financial crunch at the time of repayment. We take it one step at a time and aid your business through a merchant cash advance.


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This post was written by firstdownfunding

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