Whether you find yourself a bit short on cash or you’ve come across an opportunity to grow and expand, there’s a good chance that at some point, you’ll need some extra funds for your business. When the time comes, there are several funding options to choose from.
Merchant cash advances (MCAs) and working capital loans both offer business owners quick access to cash, but there are some significant differences. This guide provides an overview of each, so you can decide which option is best for your business.
What are Merchant Cash Advances?
A merchant cash advance actually isn’t a loan at all. Instead, it’s an arrangement that allows a provider to give you a lump sum of cash upfront in exchange for a percentage of your future credit card sales.
Merchant Cash Advance Terms
One of the things borrowers love about MCAs is that they allow for flexible repayments. Since your repayment amount is based on your sales, if you go through a slow period, you won’t be stuck with a fixed monthly payment that you can’t afford. Often, the MCA provider will automatically receive the payment from your credit card provider or withdraw it from your bank, so you also won’t have to worry about remembering to make your payments on time.
Since an MCA isn’t a loan, it can also be a great option for borrowers with bad credit or other financial issues. There’s also no personal guarantee required, which may give you some additional peace of mind.
Merchant Cash Advance Requirements
To qualify for an MCA, you typically must have been in business for a certain amount of time and meet a minimum monthly sales requirement. For example, Zinch requires borrowers to have been in business for six months and have at least $10,000 in sales per month.
A merchant cash advance can be particularly beneficial for certain types of businesses such as hair salons, restaurants, and retail stores. It may also be a good option for seasonal businesses and those that have fluctuating revenues.
How to Apply for a Merchant Cash Advance
It’s critical that you do your research and find a reputable MCA provider. There are many options, but not all are trustworthy, so take the time to understand who you are working with. Once you’ve found the right company, the application process should be fairly quick and easy.
In most cases, you can simply complete an online application and submit a few pieces of documentation. This may include copies of your bank statements and information about your current credit card provider.
What are Working Capital Loans?
Working capital loans are another common option for business owners looking for quick and easy funding. These loans are typically used for short-term business expenses rather than for purchasing assets or making long-term investments. They’re often used for things like meeting payroll, purchasing inventory, or completing necessary equipment repairs.
Working Capital Loan Terms
Unlike MCAs, working capital loans require fixed payments over a set repayment term. At Zinch, our repayment terms range from three months to one year. We also automatically collect your payments each month, so you won’t have to worry about missed payments or late fees.
Working Capital Loan Requirements
For some business owners, a working capital loan can be a faster and easier funding option when compared to MCAs. When applying for this type of loan, you won’t have to worry about having a minimum amount of credit card transactions. And since you don’t have to involve your credit card processor, the approval process may be quicker too.
At Zinch, our loan approvals are based on your business revenue instead of your personal credit. So even though we check your credit as part of our approval process, bad credit won’t necessarily exclude you from getting a working capital loan.
How to Apply for a Working Capital Loan
The application process for a working capital loan is quite simple. If you apply with Zinch, you’ll start by submitting a few pieces of information, then one of our financing specialists will contact you to discuss your options. We’ll request a few more pieces of documentation and you’ll be on your way.
Ready to learn more about small business loan options with Zinch? Contact us at (714) 500-6622 to discuss your options. You could qualify for up to $250,000 in just 24 hours.
