MCA, Credit Cards And Business Loans: Which One Should You Pick?

The most challenging phase of any business is usually the starting point. You haven’t got any paying customers yet, and you need money to fund the various segments of your business. There are multiple ways to finance a small business. The method to use depends on your financial needs, eligibility, preferred repayment terms, etc.    

Business funding options include MCA (Merchant Cash Advance), credit cards, and business loans. Small business loans from companies such as Camino Financial can help you fund your business. Business loans are different from credit cards and MCA, no matter how similar they sound. We’ll explain what these three are and how they differ from one another. How do you pick one of the three? We’ll tell you how to do so in this article. 

MCA (Merchant Cash Advance)   

This is a short-term business funding option in which a business receives trade receivables or cash advances to be repaid in the short-term future. Cash advances often provide money for businesses and are paid back from the daily income of the company. Some MCA providers have partnerships with credit card companies where they take a specified amount of money from the daily credit sales of the company.   

In strictly technical terms, a merchant cash advance is not a loan. It is merely an advance for part of the future credit and debit sales of a company. A good advantage of MCA is that the repayment plan depends on how much a business makes. So, if the business is not making a lot of money, the business owner won’t be under too much pressure to repay. The major disadvantages of merchant cash advances are that they often come with high interest rates (higher than business loans), and they require fast repayment. 

Credit Cards

You can also fund your business with credit cards that are specially designed for businesses. They come with various benefits, interest rates, annual fees, and costs. Do your research before selecting a business card. Business card issuers will often examine your personal or business credit history before issuing you a card. So, if your credit is abysmal, you may not qualify for a credit card. This is unlike business loans, where a few lenders will still offer you loans regardless of your credit history. Also, business credit cards often come with more stringent conditions than personal business cards.  

Business Loans

Business loans are the most popular type of business funding. They often come from banks, the government, and financial institutions in exchange for interests on the repaid loan. Payments are made periodically until the loan is completely repaid. Before obtaining a business loan, you’ll be asked for various requirements like collateral, credit history, financial and income statements, insurance documentation, financial plans, etc. 

Small business loan terms vary from one lender to another. So, you need to understand the requirements of a lender before obtaining a loan from them. You also need to use a loan calculator to calculate the exact cost of the loan and the monthly payments required.    

Conclusion

These are the most efficient ways to raise money quickly for your business. Small business loans are the most comprehensive form of business funding. Merchant Cash Advance and credit cards are for more specific business needs. Also, business loans are often more than the other two and can cover many business needs at any stage of the business.