Compare Merchant Cash Advance Vs Bank Loan

Today, UK businesses are spoilt for choice when looking for finance, that’s great, but with so many options now available compared to the last decade it can be a mind field for business owners to find the right solution for their needs. We take a look at comparing a new alternative finance solution called a Merchant Cash Advance and see how it differs against a traditional Bank Loan.

A merchant cash advance, also known as a business cash advance is a new alternative way to raise the finance you need for your business needs. Technically it is not a loan as the provider secures against your future credit card sales by taking a small percentage of your daily sales until the advance has been fully repaid.

Merchant Cash Advance: The Pros

  • Less Paperwork – With very little paperwork to deal with the process is much faster.
  • No Business Plan – You do not need to present a detailed business plan to obtain credit – saving time.
  • Approval Within 24 Hours – With less paperwork involved you can be approved very quickly.
  • Same Day Funding – Once approved, the money can be withdrawn the same day.
  • No Fixed Monthly Terms – If you have a good month you pay back more, but if you have a slower month you pay back less – it works alongside your business.
  • Payback When You Earn – You only repay when your customers pay you by card.
  • No Hidden Fees / Interest – As it’s based on your card sales performance, there is no hidden costs or penalties for late payment – you see the clear cost upfront.
  • 90% Approval Rates – With less red tape than that of traditional banks, approval of businesses is high.

Merchant Cash Advance: The Cons

  • Expensive – As it’s a short term solution it can be a more expensive form of business finance.
  • Not Suitable For Every Business – The finance is only based against your customer card transactions. If your business doesn’t accept card, you won’t be able to obtain this finance.

Compared with traditional bank loans, a merchant cash advance has one clear simple cost, it’s significantly quicker in providing funding to your business, and repayments are only made when your business generates credit/debit card sales. It’s not for all businesses though as it’s linked to card payments. This solution is best suited for retail businesses, restaurants, pubs and hotels who have high and consistent monthly card sales.