Do I have to choose a cash advance from the merchant or a loan?
It’s always a good thing to have several options, or is it really a benefit? There are so many funding opportunities for small businesses now that when it comes time to look for additional funding, it can get a bit crazy.
We have already reviewed in an sendal blog the different types of small business loans available in Canada and what you will need to apply for them. In this article, we will look a little deeper into two popular alternative loan types; the cash advance to the merchant and the small business loan.
If you have never had to look for financing for your business, you may wonder why someone would choose to apply for additional funds elsewhere than at their commercial banking institution. In fact, there are many reasons for thousands of business owners to choose another financing solution:
- They do not meet the requirements. Banks have become much more restrictive with respect to small business loans after the recession.
- They already have a loan in the bank and can not get more money. Additional funds may be needed for a critical piece of equipment that breaks or to take advantage of a financially attractive opportunity.
- They need money immediately. Getting a loan from a bank usually takes weeks and requires a lot of paperwork.
The benefits of alternative financing
Business owners always in a hurry and short of time can apply online for small business loans or cash advances to the merchant in the comfort of their home and when it is most convenient for them.
The request is quick to make and only requires some essential information and documents that can also be downloaded.
The processing time is usually much faster than in traditional banks. Homeowners can receive from $ 10,000 to $ 250,000 as quickly as 48 hours. This is the most important benefit for small businesses, as it allows them to solve a problem quickly or take advantage of an opportunity before it’s too late.
The acceptance rate is generally higher when compared to traditional institutions such as banks. Why? Because credit is only one element of the equation. The technology platform used to evaluate an applicant takes into account a number of different data that allow them to determine the financial health of a small business quickly and efficiently.
Which financing solution for a small business is the one that suits you best?
In general, when we talk about financing outside banks, there are two products: cash advances to the merchant and small business loans. We mentioned why many small businesses choose alternative financing, but which is the best choice for you?
Cash advances to the merchant: variable repayment, variable conditions
Cash advances to merchants are a type of financing that is suitable for small businesses, but technically they do not look like small business loans. Cash advances to the merchant are sales that your business will make in the future by debit or credit card. The lender advances you funds and retains a small percentage, pre-determined in agreement with you, of your daily card sales until the advance is repaid. This variable repayment makes it a great product for businesses that have stable daily sales or busier periods or seasonal peak periods. If your sales increase, you pay back faster. If your sales decline or are completely zero at any given time, then your refund is less or even nonexistent. Cash advances to the merchant are a versatile financial tool ideal for a short-term capital injection.
Small business loans: fixed repayment, fixed conditions
There is not a very big difference between a small business loan from a bank or another lender. In both cases the conditions and repayment amounts are fixed; it is the ideal product if you want to know exactly how much you will pay and how long you will have to pay. As we mentioned before, the difference is really in the application process and the file analysis. The application is short, simple and can be completed online and funding can be obtained in days rather than weeks. Small business loans are a well-proven financing option ideal for investing in the growth of a business.
Still wondering what’s best for you, the cash advance at the merchant or a small business loan ? Find out which option is best for you and your business by contacting one of our small business finance specialists at sendal today!