As an entrepreneur you will constantly need money for your business. The money can be used for business expansion or for investing in property or equipment or for using as working capital. One cannot list down all those expenses that businesses need to make to stay competitive and in some cases, to survive. As an entrepreneur when someone needs money they have the option to choose between a small business loan and a cash advance business loan. Go through the information given below and you should know what these differences are.
The web-based microfinance companies are extremely quick to approve and disburse loans. A small business loan is based on credit and non-credit sales volumes. To make this statement simple I would like to say that you get a business loan basis the cash flow you generate for your business. A cash advance business loan is typically based on credit card sales. If your business accepts credit card payments then you can get a cash advance basis the monthly volume generated by your credit card machine.
The rate of interest in a small business loan is fixed while it is not fixed in a cash advance business loan. The providers of merchant cash advance argue that these are not loans but payments against future sales and payments. Thus the rate of interest is mostly unregulated because the laws pertaining to regular finance loans don’t apply to merchant cash advances. Hence, before you apply for cash advance find out the terms of repayment. This will help you calculate the rate of interest and the actual interest amount payable.
Since a small business loan has a fixed time period for payment the repayment amount is also fixed. In a business loan one pays a fixed amount daily, weekly or monthly. In the case of a cash advance business loan there is no fixed payment. A percentage of the daily sales generated every day is charged as the repayment amount. The lenders sometimes have arrangements with the credit card companies where they receive payments directly from your card company.
Credit history is typically more stringent when someone applies for a business loan but in the case of cash advance most lenders are rather lenient about this. However, there are many web-based lenders that don’t really consider credit rating that stringently when they consider business loan applications. This is excellent for those businesses that had fallen on bad times and defaulted on their payments.
As you can see it makes more sense to apply for a small business loan rather than a cash advance business loan. If you think long term you always prefer a business loan because the payment terms are more favorable for you. But then it is your choice at the end of the day. Simply keep in mind that your application for a business loan may be rejected based on your credit rating but your cash advance application will be approved, almost always. But when you require money immediately it is the lender that matters the most.
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