Today, we’re going to talk about something important for anyone dreaming about expanding their business quickly. We’ll compare two common ways to leverage your business to get money; traditional business loans and merchant cash advances. We’ll also share a little-known fact about the industry that you might not have read on Google.
Imagine you want to open a second location for your bakery. You need money for ovens, ingredients, and a cozy shop. A traditional business loan is like borrowing money from a bank or a financial institution. To simplify the long and tedious process we’ll break it down in two daunting steps. Here’s how it works:
- You apply for a loan, and the bank checks your credit score, business plan, and other financial details.
- If everything looks good, the bank lends you the money, and you pay it back over time with interest.
Sounds pretty straightforward, right? Well, there’s another option that’s gaining popularity, merchant cash advances (MCAs).
An MCA is a bit different. Instead of a loan, it’s more like a cash advance based on your future sales. Here’s the breakdown:
- You apply for an MCA, and The King Capital or another company reviews your sales history.
- If approved, your business will get a lump sum of money.
- Instead of fixed monthly payments, it can be any of the following; daily, weekly or monthly installments, and it’s usually a case-by-case basis.
Now, you might wonder, “Why would I choose an MCA over a traditional loan?” Well, there are a few reasons:
Flexible Payments: With an MCA, your payments are tied to your daily sales, so when business is slow, the lender may adjust payments appropriately. This flexibility can help you manage your finances better.
Faster Approval: Traditional loans can take months to get approved, but MCAs are faster usually within 24 hours. If you need money quickly to seize a great opportunity, an MCA might be your best bet.
Less Focus on Credit Score: While traditional loans heavily depend on your credit score, MCAs are more interested in your sales history. So, if you’re just starting and don’t have a great credit score yet, MCAs could be an option.
Industry Insight
Here’s a cool fact about the industry that’s not widely known: Merchant Cash Advances have been around for decades, but they’ve gained more attention in recent years, especially with the rise of online businesses. This alternative financing option has helped many small businesses get off the ground or weather tough times.
In the world of business financing, you have choices like traditional loans and merchant cash advances. Each has its pros and cons, and what’s best for you depends on your unique situation. If you need flexibility, speed, and have a strong sales history, a merchant cash advance could be the right path for your business journey. But remember, always do your research and talk to financial experts before making any decisions. Good luck with your future business endeavors!
For additional support with securing business funding, The King Capital is here to help!
Contact us today at: underwriting@thekingcapital.com and level up your business!