What Advantages Do Merchant Cash Advances Offer Over Bank Loans?

The fact that business loans aren’t the only source of business financing anymore is becoming a more commonly known thing in Canada. Not every business owner is fully aware – but the knowledge is growing. Merchant cash advances are slowly, but surely becoming a popular alternative to the traditional bank loan. And, for the most part, this can be attributed to all of the advantages that merchant cash advances offer that bank loans do not.

What is required in order to secure a bank loan vs. a merchant cash advance? There are many requirements for business loan applicants. Where do we even start? How about collateral? Banks need to make sure that they are covered in the event that a business owner is unable to repay his/her loan. Therefore, he/she is generally requested to put up an asset, such as his/her home, as collateral.

As John Tovar explains on CrowdReviews.com, collateral is not necessary with a merchant cash advance. “A merchant cash advance is considered an ‘unsecured loan’, which means that the company extending it doesn’t hold any asset of the borrower as a guarantee of payment,” he writes, “This kind of risk is then matched with a higher interest and shorter payment terms.”

How long does the approval process take for a bank loan vs. a merchant cash advance? The length of time from initial application to approval for a business loan varies. But, in many cases, it can take several weeks, even months. As explained by Louise Balle on Chron.com, there are a number of factors that come into play.

“For instance, one factor is how long it will take you to complete your well-researched business plan or financials – that could take several weeks or even months,” she reveals, “Another factor is how long it takes you to gather all of the paperwork proving your financial status…Expect the process to take a minimum of 60 to 90 days. Applications for larger amounts may take longer for the lender to evaluate.”

Meanwhile, merchant cash advances are known for their fast applications and high approval rates. “The approval process usually takes hours or a few days to commence,” says Tovar, “Requirements are also lenient, making it a better option for grabbing an opportunity or for emergency situations that need immediate cash.” At Synergy Merchants, we’ve been known to approve and fund our clients within 24 hours!

What is the difference between bank loans and merchant cash advances when it comes to repayment? As we’ve often heralded, this is the best part about our alternative business funding source. While bank loans require their borrowers to make monthly minimum payments, there is no repayment schedule when it comes to merchant cash advances. Payments are made automatically through small percentages of a merchant’s future credit card and debit card sales.

“Repayment has also been automated by deducting a portion of credit and debit card sales until the full amount and all associated charges have been repaid,” Tovar describes, “This makes it easier for businesses not to miss a payment and gain more interest charges.”

For more information about our merchant cash advance program or to speak with one of our licensed funding specialists to get a free, no obligation quote, simply call Synergy Merchants at 1-877-718-2026 or email us at info@synergymerchants.com.