Choosing wisely: Secured Business Loans or Merchant Cash Advance

secured business loan

Launching a new business or expanding an existing one requires sufficient working capital where it can be used to purchase office equipment, hire more employees and buy inventory. However, it is always hard for many small businesses to obtain the funds they need to expand their business while maintaining normal operations. The majority of these small business owners turn to business loans, where even some lenders are reluctant to finance a new business or those with bad credit history. Secured business loans are readily available for small businesses, and lenders always prefer this type of loan. This is because the lenders claim that the secured loans guarantee at least part of the repayment once the company defaults on the business loan. However, this is risky to the borrower since he will lose all the property that was used as collateral.

A secured loan is a form of lending that required a borrower to present a valuable property to be used as a guarantee for the business funding. In a scenario where the business fails to pay the loan, the lender is mandated to repossess the assets used as collateral. In essence, the loan provider will sell the property to recover some portion of the loan amount.

It is evident that not all types of businesses will be approved for business funding from a conventional bank and other financial institutions. This is because banks prefer funding established business that doesn’t have cash flow problems and are reliable. These banks will also reject any your loan request if you have bad personal and business credit. Therefore, qualifying for a secured business loan requires a good credit history and a well-established and profitable business. You will be entitled to get a huge sum of working capital as you enjoy stable repayment terms. Note that secured business loans are not the best business financing method. For instance, a merchant cash advance is a form of alternative lending that offers favorable terms and has been booming over recent years. Nevertheless, if you are in need of quick cash for your business, applying for a merchant cash advance is the best alternative. Merchant cash advance lending is suitable for those business owners who don’t want the debt to reflect on their credit rating. It is also ideal for those individuals who operate a seasonal business.

Some of the benefits of applying for a merchant cash advance include:

 

  • Less documentation
  • Rate of loan approval is high
  • No collateral required
  • You are not restricted on how to use the advance
  • Flexible repayment terms

 

Typically, a merchant cash advance is not a loan; rather it is a process where a merchant cash advance lender agrees to purchase your future credit card sales at a discounted price. You will be selling a percentage of your credit card receivables to the merchant lender. Once you submit your online loan application, an agent will contact you and explain any items that seem unclear. The moment you sign the agreement on the amount of advance and how you will pay back, the money will be transferred to your business account within three days.

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