Although in the end, a small business loan and a merchant cash advance serve the same purpose, (to help finance your business) there are myriad differences between the two.

A small business loan is lent to small business owners to finance small businesses, and it is to be repaid with interest on or before a fixed date. A merchant cash advance is a sum of money advanced to a small business owner as a purchase of the business’ future credit card sales. Below, the major differences between a small business loan and a merchant cash advance are outlined.

The process of applying for a small business loan can be very tedious. First, the prospective loan recipient must set an appointment to meet with the bank. Prior to the first meeting, it is important to gather all necessary documents, which can include a business profile, business plan, loan request, list of collateral, and personal and business financial statements. Upon meeting with the loan consultant, you will be expected to pitch yourself and your business, and prove that approving the small business loan is not a risk.

To apply for a merchant cash advance with Merchant Resources International, the only requirements are; the completion of our two-page application and documentation of the last four months of your business’ credit card transactions. Unlike a small business bank loan, you will not need to prepare a loan request. We review your credit card sales and determine how much we can approve you for. There is no interview process and no need to convince us to approve you for a merchant cash advance. In fact, everything can be done via phone, internet and/or facsimile.

Requirements for receiving a small business loan include proven ability to manage a business, good credit, good personal financial standing and collateral. This is because when seeking a small business loan from a bank, the bank is actually lending the money to you to use for your business. Merchant Resources International lends money to your business, for your business. Therefore, we only require that your business has been in operation for at least four months, and that your business processes at least $2,500 in monthly credit card sales.

With a small business loan, after all documents have been completed and received, it may take up to 5 days for your loan to be approved. After your loan is approved, it can take up to 60 days to reach loan closing. This is the point when all of the final loan documents are completed and the loan is funded.

With a merchant cash advance, after submitting your two-page application and your documentation of the last four months of credit card transactions, you can be approved in less than 48 hours. After approval, the money can be in your account in less than seven days. During the time that it takes to be approved for a small business loan from the bank, you could already have your merchant cash advance in your account and soon after working for your business to increase working capital.

Small business owners are required to repay a small business loan by a certain date. They usually make monthly payments and can have high interest rates. When repaying a merchant cash advance, there is no interest and the business owner him/herself is never responsible for remembering to make monthly payments. A percentage from the business’ daily credit card sales is automatically deducted until the merchant cash advance has been paid.