Understanding Merchant Cash Advances and Business Loans

There will likely come an instance where your business requires additional funding.

It’s a common part of running a business, considering money is how you move forward and continuously build and evolve as a company. If you are ever faced with a shortage of financing, you will likely look around for options where you can receive some kind of assistance. In this sense, it’s important that you understand the various options that are available for you, including merchant cash advances and business loans.

There is a key difference between merchant cash advances and business loans. If you are in need of additional financing, you may have been wondering whether a merchant cash advance or business loan better suits your individual needs. The first step is always asking yourself why you are in need of additional financing. Why are you looking for additional funding and how do you plan on using these funds? The next step is understanding their individual differences, which can help you make your decision.

In essence, a merchant cash advance (also sometimes called a business cash advance) is when a business owners receives an advance on their future credit card sales. This is advance is then paid off as your advance company keeps a percentage from each credit card transaction until the amount has been paid back.

In other words, let’s say you run a restaurant as your business and you receive an advance of $20,000. The advance company will request a percentage of every credit card transaction that you make until you have paid back the requested advance.

The way a business loan works is much like any other loan. The loan is registered for and you receive funding once you have been approved. The loan will then be paid back at a later time, depending on the terms of your loan.

In some sense, merchant cash advances and business loans are similar in the sense that in both cases you are receiving your money immediately; however, cash advances aren’t considered loans nor are cash advances defines as ones, in addition to the fact that they aren’t reported to the credit bureaus. It’s important to think of merchant cash advances and business loans as their names define them — one is a cash advance whereas the other is a loan.



Material Disclosure: This content is for informational purposes only. MyBusinessLoan.com does not represent or endorse the accuracy or reliability of any of the information, content or advertisements contained on, distributed through, or linked, downloaded or accessed from any of the services contained on this website, nor the quality of any products, information or other materials displayed, purchased, or obtained by you as a result of reading and using this site. MyBusinessLoan.com may temporarily remove or delete what appears to be potentially unlawful content or content otherwise prohibited under this policy. Please consult your legal counsel before relying or acting on any information provided on this or any third party website. MyBusinessLoan.com is a marketing lead generator and DOES NOT take loan applications, originate, service, make loans or credit decisions in connection with loans, nor does MyBusinessLoan.com issue commitments or lock-in agreements. You should ask your lender if you have any questions or concerns about your loan or loan options.