Working Capital Loan or Business Cash Advance – which one is better

Both of these methods are used for working capital financing but which one is better will be clear from following discussion

• Qualification ease: Working capital business cash advance is difficult to obtain because for working capital funding financing bodies factor in the credit score of the borrower, available collateral and various other factors. However, most small businesses would easily qualify for a business cash advance as all you need is certain amount of credit card processing in month.
• Processing Time: It’s a week or more for working capital loan to get approved as a lot of paper work is involved. While application for business cash advance is processed much faster (pre-approval in 24-72 hrs) and the paper work is also not much. In fact with companies like MerchantCashAdvance processing is done online.
• Ease of Repayment: A business cash advance is never tied to a fixed repayment schedule. The repayment is done from credit card sales receipts and the businesses generally do not feel the pinch. Working capital loans on the other hand would have a fixed repayment schedule and the borrower would need to repay the amount according to the schedule. If the borrower fails to repay the working capital business cash advance, it might affect his credit score and he also stands the chance of losing his collateral.

Want Small Business Funding Fast – Get your basics right

Your bankers should be your first stop in applying for small business funding. You and they have a history of working together. Familiarity goes a long way in pre-clearance of doubts and insecurities. Also banks offer slightly better rates for commercial loans than others.

But banks are more circumspect, and adherer of rules and guidelines regarding the borrower.

There are many other types of business lenders. The main differentiating factor is the type of loans they offer: secured or unsecured loans.

Banks usually offer unsecured ones, while independent financial organizations favor secured loans more.

These independent financial organizations are prepared to take more risks on startups and smaller businesses than banks. Often they specialize in particular industries, types of loans, or business sizes.

Essentials of loan applications

It is the first and perhaps the most important part of borrowing process, especially small business funding. Applying for a commercial credit requires a lot of preparation. Following are some key documents you are required to prepare:

• Financial statements: balance sheet, profit and loss statement, and tax returns of the company
• Personal financial statements and tax returns for last three years
• Cash flow estimates on the monthly basis
• Comprehensive business plan
• Precise loan utilization detailing
• Profiles of decision making people i.e. top management

The thoroughness and accuracy of these documents are absolute musts for successful borrowing, so it pays to prepare them carefully. Have your financial documents reviewed by a qualified accountant before presenting them.

Business Cash Advance, a Good Alternative:

But is there any alternative to loans so far as the small business funding is concerned? Yes, there are many other companies that are offering business cash advance to small business owners.

Business cash advance is not a loan and the organization offering this cash advance gets their money from the credit card sales that the business does in a specific period, there by reducing the burden of paying back the loan and the terms and conditions to qualify for such cash advance are also relatively simple and can be good alternative to bad credit small business loans as they come at very high interest rates.

There are quite a few organizations which provide such cash advances. Organizations like MerchantCashDirect usually provides cash advance for working capital needs. They more often than not, target specific industries.

I hope that I helped clear some doubts and given some useful information. If information is power, you are now empowered to succeed in your endeavor to secure loan, there by realize your dreams.