Business Cash Advance vs. Small Business Loans
In the past, certain small business owners faced a dilemma. They owned healthy and prosperous small businesses, but these small businesses could only continue to grow if funds were plunged into them. Unfortunately, the owners’ low credit scores and/or lack of collateral prevented them from being able to receive small business loans.
Now, the economy is in a different state than it was a decade ago, and many of the small business owners who previously had no problem receiving small business financing through a bank, are no longer eligible for small business loans.
Ten years ago and today, those small business owners who did not qualify to receive traditional bank loans, but still needed funds to grow their businesses turned to the business cash advance. This phenomenon has caused this innovative method of business financing to be coined "the small business loan alternative."
As a cautious and conscientious small business owner, searching for adequate business financing, simply knowing the names of various business funding methods is not enough. You want to know the differences and the similarities of the small business loan and the business cash advance, as well as why a small business owner would choose one over the other.
Business Cash Advance
A small business owner who receives a business cash advance is actually selling his/her business’s future credit card receivables. Therefore, a business cash advance is not a loan, but a purchase of a business’s credit card sales. This is what enables the repayments to be so flexible. Rather than requiring business owners to make fixed monthly payments, business cash advance lenders accept a small percentage of daily credit card sales as repayment, until the entire advance plus a flat rate, are repaid.
In order to qualify for a business cash advance, one must have owned his/her business for at least six months, and process at least $5,000 in monthly credit card sales.
Small Business Loan
Most banks require borrowers to have excellent credit to qualify for a small business loan. They must also have collateral and present both personal and business credit history.
Small business loans are often repaid via fixed monthly payments, with interest. They are typically less expensive than the business cash advance, but it is much more difficult to qualify for a small business loan.
Most types of business owners can receive small business loans, unlike the business cash advance, which is only suitable for merchants.
| Business Cash Advance | Small Business Loan | |
|---|---|---|
| Two Week Process |  |
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| Inexpensive | |
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| Suitable for Non-Merchants | |
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| Unsecured | |
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| Less Than Perfect Credit OK | |
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| Flexible Repayments | |
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| Easy Renewals | |
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| Up to $500,000 in Funds | |
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| No Restrictions | |
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| Suitable Method of Business Financing | |
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| Minimal Requirements | |
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