Merchant Cash Advance offers complete flexibility to the small businesses, unlike a standard small business loan offered by the traditional lenders. Here are the top differences.
While all small businesses need a small business loan to grow their business, they all have specific requirements which do not get solved by a standard business loan. The traditional lenders offer the standard business loan which is offered against collateral like the home or office properties which is evaluated to underwrite the small business loan. These loans have standard repayment process and a long application process which might take a few weeks or months.
Merchant Cash Advance, on the other hand, is a unique product for the small businesses that have customer walk-ins and offer the facility of a card swipe machine or payment wallets for accepting payments. The new age digital lenders then consider these transactions to offer unsecured business loans to these small businesses using the merchant cash advance. Here is how a merchant cash advance differs from a business loan.
The small business loan offered by the traditional lenders is evaluated on the basis of the collaterals offered and the valuations that those collaterals can attract. Whereas the merchant cash advance processes the small business loans on the basis on the business transactions. A Merchant Cash Advance is offered by the leading digital lenders like Indifi and for the small retailers, restaurants and other businesses who accept customer payments using the card swipe machines or the payment wallets. They get evaluated for their creditworthiness based upon these transactions. Hence, they do not have to depend on something like a home property for their businesses, it is their business which gets them the small business loan which they may use for their growth.
- Application Process
The traditional lenders offering the standard business loan have a lengthy application process, where a small business has to pay many visits to the lender’s branch offices and submit multiple documentation which includes the property papers, business documents, bank statements, income tax returns, KYC and several other documents. All this takes a long time which might be weeks or even months that completely puts the small businesses off the growth track as their immediate needs for funds can’t get solved. A Merchant Cash Advance on the other hand offered by the leading digital lenders like Indifi has a quick and simple online application process where a small business has to simply fill the form with basic business details and KYC information which is then used to automatically fetch the business transactions using the partner network and thus, a small business can get the decision on their small business loan under the merchant cash advance under 24 hours itself.
The business loans offered by the traditional lenders have a simple forward use case where a business submits their property papers and gets a small business loan against the valuation and then it has to repay the small business loan in equated monthly instalments. However, there are different use cases for every small business which do not get solved by the standard business loans. Some of these could be to pay the food delivery apps immediately while the restaurant gets their money from clients within next 30 days which they can use to repay the short term business loan, this money could be used for promoting during a festive month or a special deal going on on the food delivery app. Such special usages are taken care of by the merchant cash advance which is offered as a special product for consumer-facing businesses by the top digital lenders like Indifi. It solves both long term and short term business needs
- Repayment Flexibility
While the traditional lenders offer only standard repayment options for the business loans it may not suit the business needs of the small business who unlike the large corporates do not heavy a huge cash flow available to them. The small businesses go through various business cycles and are mostly are not able to pay the same amount for repayments every month. This is where the merchant cash advance offered by the leading digital lenders like Indifi helps the small businesses by integrating the repayments with customer transactions. Thus, the small business loan gets repaid automatically with a minimal share from every transaction and hence, a business pays more when it earns more and automatically pays less when it earns less.