Small business owners experience short-term cash flow problems sooner or later while conducting a business. The funds may be required for any purpose such as supplies, equipment, salaries to the employees, taxes or paying the existing debts. Fund shortage can also be due to a delay in receiving payments from customers and because of business off-season periods. Even if you are certain that sales will pick up in the coming months, you will need to funds to meet day-to-day business operations. Small business owners may either apply for a payday loan or a merchant cash advance to make funds available to these business.

Some business owners consider payday loans to receive funds for business operations. However, this can prove to be expensive for your business as the payments will be coming to the personal checking account. Moreover, even if business is slow you will be obligated to pay the monthly amount, and you also need to continuously check your checking account to make sure funds are available when the loan amount is due. There are much more issues which companies and business owners have to deal with if a payday loan is acquired to arrange cash for the business.

Many business owners are turning away from payday loans

Many business owners are turning away from payday loans as they are proving to be expensive to the business in the long run. The APR on an annual basis on this loan is more than 500% which is not a good practice for any business. However, business owners that are desperate for funds force themselves to seek out these payday loans which is highly unnecessary. Although it appears to be an easy solution at the moment, it is easy to acquire since it only requires an online application, the repayment continues for long periods of time.

A business merchant cash advance is an advance against future debit or credit card sales

A small business that has a merchant account and deals with credit or debit cards for receiving payments can acquire a merchant cash advance loan instead since it is a less expensive alternative to a payday loan. A business merchant cash advance is an advance against future debit or credit card sales which is paid off as a percentage of the daily sales of the business. You are not obligated to pay a fixed amount every month, and the repayment depends on the sales for that particular period. If the sales are high, the repayment amount will be high and vice versa.

The process of availing business merchant cash advance in simple and involves less paperwork. You can be apply online, and most of the financial information of the business is collected by the lender from the merchant account provider of the borrower. The loan is approved in 3-4 days, and the amount is directly deposited into the business account of the borrower in less than a week’s time.

The credit rating of the business owner does not play a significant role in the approval of merchant cash advances. These cash advances can be availed even by business owners with bad or lower than average credit rating. Availing business merchant cash advance is easy and effortless when compared to traditional bank loans and are less expensive than payday business loans.