When it comes to obtaining a quick and convenient lending option, you really have two options available to you: A merchant cash advance (MCA) or an unsecured business loan (UBL). To compare business loans and their structures, you will notice that both have simplified processes, providing a welcomed alternative to the lengthy and prohibitive criteria of traditional bank financing. So here is what you need to know when deciding between these alternative lending solutions:

The defining feature of a merchant cash advance is that repayments occur via a small percentage of each and every credit or debit card purchase that goes through your terminal. The unsecured business loan, however, involves small daily instalments. With this in mind, we recommend a merchant cash advance for any businesses looking to invest in growth strategies. While loans on the other hand, are preferable for companies with fast-moving inventory.

When to choose a Merchant Cash Advance

When it comes to buying inventory, the upfront costs can be absolutely overwhelming. This is a necessary evil which can put short-term pressure on your cash flow. The upside of this, however, is long-term gain with improved products and services. A merchant cash advance is ideal for this type of scenario as it allows for cyclical repayments that work in line with your credit/debit card turnover. This means that as the business improves, your advance can be paid off quicker. Conversely, when turnover is slow, your repayments slow down accordingly. This allows the business owner to focus on sales and brand promotion, rather than covering unruly ongoing expenses.

With this in mind, the sudden demand brought on by shifts in seasonality can be efficiently managed with a quick merchant cash advance. For example, if Christmas trade suddenly peaks and your business requires a quick cash injection to keep up with inventory, a merchant cash advance can see to that need. While it’s not exactly a same-day business loan it can be accessed as quickly as 24 – 48 hours via an efficient online business loan application process. Allowing you to service your customers immediately without putting you under unnecessary pressure.  If a company has been operational for six months or more, then the other option is an unsecured loan. This boasts competitive interest rates and terms that can cover the entire holiday season.

Developing New Products

If your business is looking to develop new products, the MCA is recommended. This is due to its flexibility which allows time to develop (and then eventually test the market) without worrying about immediate fixed repayments. On the other hand, for businesses with existing products, the UBL might be preferable. Here existing cash flow will cover the small incremental loan repayments. This renders them easy to cover if these (or other) items are eligible to sell immediately, covering the daily instalments.

A business expansion calls for the MCA

Expanding into new territories is an important way for a business to widen its offering. But this requires capital, and often a lot of it. Here a merchant cash advance is key to the venture as the flexibility and innovative repayment terms allow for the time and space required to test the market and gain traction in a realistic period of time.

Get an Unsecured Business Loan when business needs a boost

If your business suddenly experiences a dry spell, consider an unsecured business loan.  This might be just the thing to help get things up and running. Say for example, a small bakery experiences a sudden (but meaningful) drop in sales. This could be due to poor sales staff, unmonitored cash flow or even incorrect inventory. If the business has been operational for more than six months (and really just needs a chance to reevaluate key areas of the business) the UBL will function as a quick credit line. This will provide enough breathing room to re-do, re-evaluate and re-emerge as a better business.

At the end of the day, both the Merchant Cash Advance and the Unsecured Business Loan ranks amongst the easiest ways to get a business loan. It can be difficult to know exactly which option is the best business loan for your needs.  The bottom line, in fact, is that both are great options due to their flexibility, quick turn-around times and feasible terms. Fintech lenders have built their businesses on providing different types of loans with favourable scenarios that provide a ‘win-win’ scenario for both the business owner and lender alike.

Speak with a lending specialist today about funding the growth of your business.


Stay Informed with Merchant News!

Receive business and finance news in your inbox once a month. Completely FREE!

Keep your business growing with operational insights from Beyond Merchant Capital.

We wont share your details, or spam you. Promise.