Looking for alternative financing is a step closer to meeting your business’s financial expectations. You, however, need to understand your financing options before deciding on the best one. Merchant cash advances and business loans are among the financing options you can consider. But how do MCA and term loans compare?
Merchant Cash Advance
An MCA is financial aid provided to a company for its future sales, but not a loan. In most cases, the laws applied on term business loans don’t govern merchant cash advances. With this kind of financing option, there are no interest rates or APRs, which differentiate them from other loans. It is effective to consider merchant cash advances than term business loans.
A company receives funds in advance against their expected monthly income or sales with merchant cash advances. Most lenders will look at your expected returns to determine the financial aid you can receive. You should, however, expect some lenders to charge additional fees, especially on late repayments. It is much easier to access and utilize MCA than other alternative financing options for your business.
Small Business Term Loans
Terms loans vary with their applicability in the market. You can get business loans for equipment purchases or any need in your business. You might, however, need collateral to secure business loans. There are also term limits for repayment, and you must pledge to meet the timeline to access the loans.
Unlike other financing options, you get the full amount upfront with term loans for your business. You can also make repayments partially or in regular installments depending on the loan terms. The repayment periods vary with the lender, the purpose of the loan, and the amount received.
Unlike MCA, small business loans, you should be ready to handle interest rates that come along with the amount received. It is prudent to discuss with your lender about the interest rates before signing any documents. You should also be keen on the assets you can use as collateral for the loan you receive. Ensure you learn the different application requirements from different lenders when looking for small business loans to avoid making costly decisions.
When looking for alternative financing options for your business, it is prudent to make informed decisions. While MCA and business term loans are options, you still need proper guidance. Call or visit Lode Capital today for professional guidance.