If you’re a small business considering using merchant cash advances for working capital, consider a smarter alternative — a business loan from Signature Small Business Loans.
Signature Small Business Loans is a preferred option to merchant cash advances – we offer lower rates, fixed payments and true business loans where your payments are reported to the business credit bureaus. And with Signature Small Business Loans, you can apply in just minutes and have funding in as fast as one business day.
If you’re seeking merchant cash advances for financing specific purchases such as equipment, inventory, expansion or marketing, consider instead a 3-24 month loan from Signature Small Business Loans. Requirements include: 1 year in business and $100,000 in annual revenue.
What is a Merchant Cash Advance, and how is Signature Small Business Loans Different?
With a merchant cash advance (sometimes known as a business cash advance), a business owner gets an advance on their future credit card sales. This advance is paid off by the advance company taking a percentage of each credit card transaction until the agreed upon amount has been paid back to the advance company.
For example – Joe’s Pizza gets an advance of $10,000, and they agree to pay back $14,000 (note: Signature Small Business Loans offers rates are far lower than this). The advance company then takes a percentage (typically 10%-20%) of every credit card transaction until the business has paid back the agreed upon $14,000. It is important to note the difference between the “hold back” (10%-20% in this case) and the “payback” or “interest rate” (40% in this case.)
Three Reasons Why Signature Small Business Loans is Different
1) Signature Small Business Loans rates are typically up to 50% lower than a merchant cash advance.
2) Unlike a business credit card advance, Signature Small Business Loans offers both a fixed rate and a fixed term. This means that a business owner knows the exact amount they will pay back, and the exact date the loan will be fully paid off.
3) With an Signature Small Business Loans loan, repayment is reported to the business credit bureaus.
Frequently Asked Questions about Merchant Cash Advances:
A: The rates of a merchant cash advance will vary by the size of the advance, the perceived risk of the merchant and the term of the payback. Typically, a business will pay back between 20% and 40% of the amount borrowed with a merchant cash advance. In some cases, the rates can range as high as 60% of the amount borrowed. Important note: Signature Small Business Loans rates are far lower than this.
Q: Do I need to switch my credit card processing to get a business cash advance?
A: Generally, you do have to switch your credit card processing and point of sale system to get a business cash advance. Cash advance companies measure your revenue through their own proprietary hardware and software that is built into the POS system.
Q: Is a merchant cash advance the same as a business loan?
A: A merchant cash advance is not the same as a business loan. Though in both cases a merchant will get money up front to pay back at a later date, merchant cash advances are not legally defined as loans and are not reported to credit bureaus.
Q: Does a merchant cash advance build business credit?
A: Merchant cash advances do not build business credit. Paying back any number of merchant cash advances completely will not improve your business credit.
Q: Can I get a business cash advance if I don’t accept credit cards?
A: Significant credit card sales are required to get cash advance financing. Cash advance companies measure your revenue by credit card volume going through their own proprietary POS systems.