A Business Cash Advance vs A Business Loan
When considering funding options, many business owners lean toward the tried and true. Habit is human nature, but don’t let yourself get comfortable with a less than optimal situation. business loans have a long history of success, and a less recognized history of failure. A loan is not for everyone; while the loan application process is prohibitive for many people, for others it is passable, but for members of both parties there may be a better option. Thousands of business owners have done their research and decided that the benefits of a business cash advance outweighed those of a traditional bank loan.
The first notable difference is the application process. When applying for a bank loan, preparation alone may take days or even weeks. So much relies on presentation and the business proposal that some applicants even feel the need to hire a professional to aid them in the process, ironically spending capital when they need capital. In addition to the business plan, they must disclose a wide variety of personal information that includes everything from the typical name and address to assets to financial statements.
On the other hand, the application for a cash advance is significantly simpler. All you are asked to provide is rudimentary personal and business information, proof of your company’s ability to process credit card transactions, and the average revenue received via credit card transactions. This requires little to no prep work, and you will receive notice of your approval within 24 hours.
The second notable difference is approval rate. If you are willing to risk your property, you may get a secured loan at a lower rate. If you have no assets but are approved, it will be for an unsecured loan with stricter terms and higher rates. Banks are fairly inflexible when it comes to clients with poor credit, and you will either suffer a much higher rate to justify their risk or be flatly refused.
Quite the opposite, the approval rate for business cash advances is nearly ten times higher than the approval rate for business loans. You are not required to front collateral to receive an advance because an advance is not a loan. The obligation to repay their investment lies in your future business revenue, not in your personal assets. Furthermore, your repayment percentage is not based on credit rating, credit history, or assets. It is based on your business’ revenue potential.
The final key difference is usage. Traditional business loans are strictly regulated, and each type is approved for very specific purposes. Though you may have extra capital from the loan after completing the original project, you cannot apply those funds to anything outside the pre-approved uses. If the bank determines that you have misused funds you could be subject to additional penalties or—far worse—legal action.
A business cash advance is unconditional capital. The applicant determines how to use it, whether it’s on one project or several. Your provider does not regulate usage and there are no penalties associated with it.
For the reasons above–and many others specific to individual applicants—business cash advances are gaining in popularity among owners looking for a funding option that provides less stress and greater liberty.
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April 28th, 2009 at 11:09 pm
Both business cash advance as well as business loan has its own importance in their respective way…..