If you’re looking for some quick cash for your business, you may have started by exploring the possibility of taking out a traditional bank loan. While this can be a good option for some businesses, it’s common for many small to medium-sized businesses to find that they have trouble meeting traditional lending requirements.
Luckily, there are other options. For example, a merchant cash advance may allow you to get the funding you need without having to go through the rigorous process of getting approved by a bank. The following guide provides a quick look at what a merchant cash advance is and how it compares to a traditional bank loan.
What is a Merchant Cash Advance?
A merchant cash advance (MCA) is an alternative funding source that offers business owners quick access to a lump sum of cash in exchange for a portion of their future credit card sales. One of the great things about an MCA is that there are no limits to the ways you can use the money. Businesses often use them to fund inventory purchases, meet payroll obligations, cover marketing expenses, or even pay quarterly taxes or other debts.
How to Get a Merchant Cash Advance
The first step to getting an MCA is finding a reputable provider. Not all lenders are created equal, so take some time to do your research. Once you’ve found a provider you can trust, the application process should be quite easy. For example, with Zinch, all you need to do is complete a short online form, then one of our loan specialists will contact you to discuss your options.
We’ll walk you through the simple process of submitting the necessary information. You’ll find out quickly whether you’re approved, and if you are, the funds will be deposited directly into your bank account.
MCA vs. Traditional Bank Loans
If you’re trying to decide whether an MCA or a traditional bank loan is best for your needs, make sure to weigh the pros and cons of each option. Here’s a look at some of the most important points you’ll want to consider.
1. Ease of Approval
Small business owners often find that it’s easier to get approved for an MCA than for a bank loan. Since MCAs are based on your credit card sales, rather than on your personal credit, they can be an excellent option for business owners who have not had time to build up sufficient credit or who have less-than-ideal credit scores. On the other hand, banks typically require a minimum credit score and may look at other factors such as your debt-to-income (DTI) ratio, when determining whether you qualify for a loan.
It is important to note that to qualify for an MCA, you will need to accept credit cards and have a specified amount of monthly credit card sales. Some lenders also require you to have been in business for a minimum amount of time. For example, to qualify for a Zinch Flex MCA, you must have been in business for at least six months and have at least $10,000 in monthly credit card sales. These requirements make MCAs better suited to certain types of businesses, such as retail shops, hair salons, restaurants, and others who have frequent credit card transactions.
2. Down Payments and Collateral
A traditional bank loan may require you to make a down payment or put up collateral. Some may also require a personal guarantee, meaning that you are personally responsible for repayment if your business defaults. MCAs do not have any of these requirements.
3. Payment Requirements
While most bank loans have fixed monthly payments over a set period of time, MCAs are repaid based on a percentage of your credit card sales. This means that the amount you pay fluctuates with your business, giving you the peace of mind that comes with knowing you won’t be stuck with a large monthly payment if your sales begin to decline.
There is a bit of a tradeoff that’s worth noting. In some cases, the overall cost of an MCA may be higher than other financing options. However, many business owners find the flexibility an MCA offers makes it well worth the extra expense.
4. Speed of Funding
Getting a loan from a bank can be a tedious process. There’s often a fairly long application process and the bank may require a significant amount of paperwork to verify your income, assets, and other information. However, applying for an MCA is typically a quick and easy process. And while the bank may take weeks or longer to let you know whether you’re approved, an MCA is often approved in a day or two.
Get the Funding You Need!
If you’re looking for a quick and easy way to fund your business needs, a Merchant Cash Advance might be the right choice for you. Contact us at (714) 500-6622 to learn more about the funding options Zinch provides. You could qualify for up to $250,000 in just 24 hours.
