subject: Is Merchant Cash Advance More Suitable Than Sba Loan? [print this page] Are you concerned that the drop in bank lending post the global economic slump will impact your business cash flow? Do you fear that risky Small Business Association (SBA) loans will add more troubles than solutions for your business? Have you considered Merchant Cash Advance (MCA) as a likely funding alternative for your business? Are you getting confused about the best option - SBA or MCA? This article can guide you on which option is a better fit for your business and will get it the capital required to make progress and flourish.
Look at the points discussed below when selecting between an SBA loan and MCA.
Required Financial Documentation
Well established businesses are expected to furnish records of present arrears, outstanding balances, and installment schedules and available security that can be offered to the bank. Startup business owners must attach a business plan that included details of monthly income projections for the initial two years when submitting an application for an SBA loan. To determine your eligibility for the loan, lenders can look into credit card liabilities, liquid capital, personal loans and account statements, tax returns, and holdings of real estate.
Merchant cash advance providers ask you to provide only two documents along with your application. These are monthly credit card statements and longevity of the business. These two factors alone will determine your eligibility for merchant cash advance and contribute towards the computation of the sum to be advanced.
Good Approval Rate
Banks are careful lenders. The SBA is only the loan facilitator. Your loan will be approved only if you can convince the banks or brokers that you will repay every penny of the loan. The quantity of financial documents requested along with the lender's caution lowers the likelihood of your SBA loan request being approved. The financial slowdown has only added to the difficulties of SBA loan seekers.
MCA providers, on the other hand, only verify your your monthly credit card sales and the number of months the business has been running. Another benefit compared to SBA loans, merchant cash advance rules do not consider low FICO and previous bankruptcies as denial criteria for the application.
Repayment Flexibility and Little Risk
SBA loan does not allow you to make changes in repayment terms once it has been processed. The repayment timetable is set and incurs heavy penalties on breach. Banks may cease and sell off your business assets. Even your individual assets such as your home and car can be auctioned in case of loan non-payment, thereby making SBA loans very perilous in an economically weak environment.
Merchant cash advance offers a flexible settlement schedule. Each month you are required to pay a predetermined cut of your credit card sales to the provider. Your repayment amounts keep changing as when your business is flourishing, you pay more. In the same way, when your business is going through a lean period, the repayments become smaller and don't make the situation worse. The chance of failing to pay is quite negligible.
Merchant cash advance hits margins but is less dangerous
MCA repayments do impact profit margins to some degree. However, defaulting on SBA loans can cause the end of your business's existence. Merchant cash advance is a far better, safer, and flexible financing choice relative to SBA loans. Protect yourself from future difficulty by making certain you understand the benefits of MCA before trying for an SBA loan.
by: Daljeet Sidhu.
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