The differences between business cash advances and loans are numerous, and many of these differences benefit the consumer. As the business cash advance industry has matured, it has become a safe and viable option for small business owners to get the cash they need to grow. Here we take a look at the primary differences between a business cash advance and a loan.
Get Your Money Faster
Bank loans can take weeks or months, but most advances take a week or less, so the business can act faster on opportunities or dire needs. Many of the investments that can have an impact on your business require a quick decision and cash on hand. A business cash advance allows you the working capital necessary to seize opportunities when they present themselves.
Easier Repayment
The automatic nature of repayment makes it easy to manage -- no confusing statements or due dates to remember. The lower chance of default makes it possible for providers to offer advances to those with less than perfect credit if their sales track records are good. Business cash advances are easy to keep organized and lower your risk of accounting errors.
Less Stringent Qualification
Because providers generally focus more on sales track record than credit rating or collateral, more businesses can qualify for an advance than for a loan. Having poor credit and a lack of collateral will all but disqualify you from getting a bank loan. A business cash advance allows you to continue to invest in your business while rectifying your finances as a whole.
No Set Repayment Term
Since repayment is a percentage of sales, the payment will vary each day. When the sales day is slower, the payment will be lower, allowing business owners to meet obligations without jeopardizing their repayment. This model allows you to better manage your finances while leaving you enough working capital to continue to invest in your business.
Repayment Is Faster
Although the repayment term is not set in stone, most advances are repaid in a year or less. Once the advance is repaid, the business should be generating more profit, which will all be available for working capital or to cover living expenses. Bank loans can span over multiple years or even decades, which can be a tremendous burden to small business owners.
A loan may seem like a more advantageous financial tool, but business cash advances offer many benefits to business owners looking for a fast, easy way to obtain working capital. Loans tend to be more limiting, and can cost every bit as much as an advance fee because of the long repayment period.
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