Is Merchant Cash Advance Preferable To Sba Loan?

By Author: Daljeet Sidhu
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Are you troubled that the drop in bank lending post the global economic slump will leave your business short of funds? Are you unsure whether risky Small Business Association (SBA) loans will be more trouble that its worth and not solve the financial issues of your business? Do you think Merchant Cash Advance (MCA) can be a likely financing alternative for your business? Are you finding it difficult to decide between SBA loans and MCA? If yes, then read on to find out which alternative is better for your business and can give it the capital needed to make progress and prosper.

Review the following factors when choosing between an SBA loan and MCA.

Required Financial Documentation

If you are a well established business, SBA lenders will expect you to produce records of present liabilities, loan balance, and installment schedules and available security that can be offered to the bank. New organizations must attach a business plan that provides information on monthly cash flow projections for the first two years when applying for an SBA loan. Your creditworthiness will be further assessed by considering credit ...
... card arrears, liquid assets, personal loans and financial statements, tax documents, and ownership in any real estate.

Merchant cash advance providers ask for only two documents while filing your application. These are monthly credit card statements and longevity of the business. These two factors alone will qualify you for merchant cash advance and also help decide the amount of the advance.

Good Approval Rate

Banks are wary of loaning money. The SBA is only a mediator. Your loan will be approved only after convincing the banks or brokers of your potential to pay back the loan. The high volume of financial credentials requested coupled with the lender's caution lessens the probability of your SBA loan request being sanctioned. The financial downturn has made it even more problematic to get SBA loans.

On the other hand, MCA providers are only concerned about your credit card receipts and the time in business. Another benefit compared to SBA loans, merchant cash advance providers do not include low credit score and previous bankruptcies as rejection criteria for the application.

Repayment Flexibility and Minimal Risk

SBA loan does not allow you to make changes in repayment terms once it has been processed. The payback schedule is fixed and any violations lead to grave penalties. Banks may cease and auction your company assets. The same can also happen to your individual assets such as your home and car can be auctioned in case of loan default, thereby making SBA loans very dangerous in a financially fragile environment.

Merchant cash advance offers a business friendly and flexible settlement schedule. Every month you are obligated to pay a fixed cut of your credit card receipts to the provider. When your business is flourishing, you pay larger sums. When your company is going through a slow sales phase, the repayments reduce in amount and don't become too burdensome. The chance of failing to pay is minimal.

Merchant cash advance hits profit margins but is safer

MCA repayments do impact profit margins to some extent. However, failure to repay SBA loans proves disastrous as it can mean the end of your business's existence. Merchant cash advance is a far better, less risky, and flexible financing choice relative to SBA loans. Protect yourself from future difficulty by making certain you understand the benefits of MCA before filling your SBA loan request.
About Author:
Daljeet Sidhu is at TradeSeam B2B Marketplace. Read Business Cash Advance blog. Get Merchant Cash Advance quotes.