What is truly the difference between a bank loan and a merchant cash advance? This is a question our licensed funding specialists hear often. And, of course, it is one that they are all too happy to answer. The truth is, there are several differences between bank loans and merchant cash advances.
We must first begin with the approval process. As many small to medium-sized business owners all across Canada are very well aware, securing a bank loan can be a long and arduous process. Most often, they are requested to put their homes, businesses or other properties up for collateral.
Of course, this puts the business owner at major risk of losing the property if a problem arises in paying back the loan. That is, obviously, if they even get the loan. A credit check is necessary, inevitably knocking down that entrepreneur’s credit rating just for the check itself. Don’t forget that a detailed business plan to outline the use of the bank’s money will also be needed.
All in all, the process generally takes somewhere in the neighborhood of 2 to 4 weeks. The process of getting approved for a merchant cash advance, on the other hand, is generally handled within any given business day. It’s as simple as reviewing a merchant’s monthly statements that summarize their credit and debit transactions.
After a monthly volume of credit and debit sales is determined, a licensed funding specialist can then provide the merchant with a free quote. This quote will entail how much money the merchant is approved for, what it will cost the merchant and what percentage of future credit and debit sales will be used to pay back the advance.
This, of course, reveals another major difference between bank loans and cash advances. An advance is not borrowed money. It represents the purchase of future credit and debit sales. By purchasing sales that haven’t yet happened, and giving it to the merchant in advance, we ensure that there is no fixed schedule within which the money must be paid back.
We consider this to be the best part about our program. With no fixed repayment schedule, the merchant is never in danger of being “late”. Of course, with no collateral on the line, nothing is at risk of being lost. As mentioned earlier, the advance is paid back through a small percentage of the merchant’s future credit and debit sales.
Those future sales we purchased are provided to Synergy through an automated process. It may take six months, it may take twelve to pay back. It may be quicker than that, and then again it may take even longer. Regardless, the merchant knows exactly how much he or she will pay back and that the amount will not change.
Naturally, there is a charge for the money, but there is no accruing interest rate. Here, we have yet another difference between loans and advances. So stop putting yourself through the trouble of securing a loan and putting your business at risk. Call Synergy for your free cash advance quote today.