Merchant Cash Advance vs Bank Loan: 5 Myths Debunked

By: Allan Thompson | Chief Operating Officer

As a business owner, you need to understand the various options available for obtaining funds, including the pros and cons of each. Merchant cash advances are a newer financial product, and they work differently than a traditional bank loan.  Although newer, MCAs are a proven and innovative way for businesses to get the cash they need to grow, overcome an emergency, or adjust to business fluctuations. When evaluating a merchant cash advance vs. a bank loan, you need accurate information.

Since merchant cash advances are not like a traditional bank loan, some myths have popped up around this alternative business funding option.  Here are 5 myths debunked when it comes to merchant cash advances.

Merchant Cash Advance vs. Bank Loan Paperwork

When a business needs funding, the thought of the paperwork requirements can be daunting. One of the major advantages of a merchant cash advance is simplified, fast paperwork. At Jet Capital, our 100% online application just takes a few minutes to complete, and we can make an initial decision within minutes.

Our use of cutting-edge technology allows us to underwrite your business with minimal paperwork requirements.  A bank might have multiple requests for additional paperwork and meetings throughout their lengthy underwriting process, whereas the Jet Capital process streamlines the required documentation and allows you to submit anything needed via a secure online portal, simplifying the process and allowing for your busy schedule.

This checklist will help you get organized so applying online is even easier.

Merchant Cash Advances and Not so Great Credit

At Jet Capital, we understand that your business is more than just your credit score. We evaluate your business based upon your revenue and the overall health of the business. It can take years to build up a credit score that will satisfy a traditional banking institution.  Less than stellar credit alone does not disqualify your business for a merchant cash advance from Jet Capital. Instead, you may be the perfect candidate for our fast, flexible funding products. If you have been turned down by traditional lending institutions because of credit challenges, consider Jet Capital for your working capital needs.

Repayment Is Difficult

Repayment of a traditional bank loan for your business is done through fixed payments on a fixed schedule while interest accrues daily, and in some cases these loans may also contain prepayment penalties.  Changes in revenues can create serious cash flow issues and undue stress with a fixed payment.

A Merchant Cash Advance from Jet Capital provides more flexibility as the daily remittance amount is based on a percentage of the business revenue, not a fixed amount based on interest rates, term, and amount borrowed.  Moreover, automatic daily remittances make satisfying the requirements even easier for merchants and business owners.  Jet Capital understands that managing cash flow is the key to the long-term health of your business.

Since a Merchant Cash Advance is not a loan there are no interest accruals increasing the outstanding balance should the daily remittance change based on changes in the business revenues, and an MCA from Jet Capital has no prepayment fees or penalties.

Merchant Cash Advances Are Industry-Specific

While some industries are more challenged than others when it comes to approval for a traditional bank loan, merchant cash advances are designed for independent business owners across the board. When banks became increasingly averse to risk in 2008, merchant cash advance funding grew to meet the market demand for small to medium business funding.

Merchant cash advance funding is available to a wide range of industries and businesses including

  • auto repair shops and garages
  • salons and spas
  • restaurants and bars
  • retailers and boutiques
  • medical and dental practices
  • hotels and motels
  • independently-owned franchises

Furthermore, for many businesses, the speed of an MCA makes it a better alternative than a traditional bank loan that could take between 2 to 8 weeks to close. Your business is moving quickly, so your funding should, too.

Merchant Cash Advances Are Expensive

Merchant cash advance funding in most cases, can be more expensive than a traditional bank loan; however, you can get the funds much faster. As with any business decision, you need to weigh the incremental return on the cash invested to grow your business, against the cost to finance that growth, or opportunity cost of business profits lost in the case of an unplanned critical expenditure. Keep in mind that with a merchant advance from Jet Capital, the bulk of the advance is merely revenue that your business is projected to make in the near future anyway.  You are selling a portion of your future revenues to get access to the funds you need now.  If you don’t have the luxury of waiting weeks, if ever, on a bank to get the working capital you need to capitalize on an opportunity or make that emergency repair, a merchant advance may be a better solution.

At Jet Capital, we understand that business owners need a range of tools to fund their operations. Unlike a traditional business loan, our merchant advances can get working capital to your business within a day or two and there is never a fee for prepayment. Our merchant cash advance products are flexible and tailored to work with your business.

If you are interested in exploring a merchant cash advance, apply today at localhost/JC or give us a call at 866-845-9674.

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