Loans Vs MCAs: All Funding Isn’t Created Equal

Posted: June 4, 2015
Category: Finance

Imagine that you are close to celebrating your business’s first anniversary. You’d like to expand your business space, but you’re not sure how to acquire the capital you need. What if you had a way to finance your business’s ambitions using funds accessible to you in as little as 72 hours? You can access this funding with a merchant cash advance (MCA). But how does an MCA compare with a traditional business loan? Below we break down the differences between loans and MCAs, proving that all funding isn’t created equal.

Basics of Business Loans

Business loans require you to borrow against both your business and personal assets, as collateral for the loan.  In addition, lenders offering business loans generally consider the owner’s credit history when making a decision whether to approve the loan.  A less-than-stellar credit history can greatly reduce a small business owner’s eligibility.  When you can’t acquire a loan for your business, you don’t have much leverage for future business development.

MCAs Defined

Merchant cash advances (MCAs) give business owners access to quick capital with payment terms that match the success of your business. Cash advances are ideal for businesses who use the funds to amplify their business’s revenues.  Requirements are typically minimal, such as the minimum requirements for an MCA from Knight Capital Funding:

  • Businesses must be in operation for at least six months.
  • Businesses must generate at least $10,000 in revenue per month.
  • Businesses must prove a strong commitment to future business growth.

Typically, MCAs work by applying a predetermined percentage of a business’s credit card transactions and future receivables towards payment of the cash advanced. Click Here for more info on how it works.