Merchant Cash Advance VS.
Small Business Loans

There are many ways that a small business owner can obtain the funds necessary to grow and reach new heights of success. Despite of numerous funding options, merchant cash advances and small business loans seem to be some of the most popular solutions to quick business financing. Wonder which one would work better for your business? The trick is understanding the distinction between the two.

Let’s define each one of them first.

Merchant Cash Advance provides businesses with upfront cash in exchange for a portion of future credit card sales. In other words, repayments are solely based on a percentage of sales.

Small Business Loan also provides businesses with upfront cash, but is paid back in fixed monthly installments.

So, what is the difference between the two?

Even though they are similar in terms of function, they come with different legal ramifications as briefly indicated in their definitions.

Let’s take a better look at it!

  1. Repayment Flexibility

    Small business loans are repaid in monthly fixed installments of a pre-determined amount. Merchant cash advances, on the other hand, are paid back in percentages of credit card sales. If the business is not performing as well and the sales are lesser, the deducted amount would be smaller. It goes without saying, higher sales would mean a higher amount would be taken for repayment. If you are looking for more regulated, predictable costs for the borrowed money, ZapRates offers small business loans with the most competitive interest rates, going as low as 4.8%. If, on the other hand, you are looking for repayment method where flexibility matches performance, ZapRates has got you covered with extremely quick merchant cash advances!

  2. Application Process

    Small business loans usually required extensive documentation which results in lengthy application process. On the other hand, merchant cash advances involve an extremely easy application process where fewer documents are typically required to apply. Unlike most of lending companies, ZapRates offers you quick application process for both small business loans and merchant cash advances with little to no paperwork required!

  3. Approval Process

    Something as simple as getting the cash you need in minutes rather than days can mean the difference between the success or failure of a business. Contrary to the generally extensive application process, small business loans can be obtained very quickly. In fact, ZapRates makes this process take no longer than a few minutes! Funds are transferred directly to a business’s account so that money is available right away. Merchant cash advances typically entail an approval process of a few days or even a week. With ZapRates, a merchant cash advance can be processed as quickly as in 24 hours!

  4. Interest Rate vs Factor Rate

    When shopping around for a small business loan, one of the most important thing to consider is the interest rate. An interest rate is a fee that you are charged for borrowing money, expressed as a percentage of the total loan amount. The average interest rate is between 6.75% and 9.25%, depending on the size of the loan and the amount being borrowed. ZapRates is offering you small business loans with the interest rate as low as 4.8% – the most competitive rate in the market!

    Unlike interest rates, which are expressed in percentages, factor rates are usually given in decimal figures and they are correlated with merchant cash advance. with a fee that is measured by a factor rate. A factor rate usually ranges between 1.14 and 1.48, and it represents what you multiply your loan amount by to find the total amount you will owe in the future.

  5. Regulation

    Small business loans are typically limited by federal authorities, which makes them more regulated and closely watched. Repayments are done through fixed monthly installments, so there is no unpredictable fluctuation. A merchant cash advance is technically not considered a loan because of how the payments are structured. Based on future credit card sales rather than fixed monthly repayments, merchant cash advances are less limited by lending laws and, hence, more flexible.

Which business funding solution is better suited for me?

Finding the right financing solution for business owners can be very confusing at times. Typically, if the priority is to get a competitive rate and predictable, more regulated payments, look into a business loan. If the priority is to process a lot of credit card transactions and more flexible repayments, a merchant cash advance could get you over a financial hurdle.

No matter the size of your business or which solution you choose to pursue, ZapRates can make your business funding a quick, easy, and enjoyable process. As a trusted leader in alternative small business financing, ZapRates provides you with immediate access to cash with little to no paperwork, no collateral or credit requirements, and same day approval!