Merchant cash advance and credit line: Which suits your needs best?

As businesses, we now have more options for funding than ever before. You can find the best options for you and your business easily as long as you know where to look and what to look for. That being said, do you know what options you do have and what makes them different?

Don't worry, we got that covered because, in this post, we will discuss the differences of a credit line and a merchant cash advance which are great options for small to medium businesses?

Let's start at identifying what they are. A credit line is a type of business loan that provides businesses with a line of credit that is available for them to draw as often as they need to as long as they continue to make regular payments and stay within their set limits. While a merchant cash advance, on the other hand, is an alternative to business loans. This option provides businesses with an upfront lump sum of money in exchange for a percentage from the business's future sales through credit card transactions. Both of these are great options when you need flexible financing, neither require a specific purpose before you can claim them.

Now that we understand these two options better and what they can offer, let's look into the details further and understand what sets them apart.

First is the qualifications or application process of these options. Being an alternative to business loans, a merchant cash advance is usually easier and faster to obtain compared to a credit line which is a kind of business loan. For merchant cash advances, business owners are asked to provide the usual company information and business records because funding providers are more interested in the business' monthly sales and other data that can help them determine the business's capability to pay back. While a credit line application would demand further more information and requirements such as a credit rating, proven sales record, the business to be at least a year old, etc.

The other noticeable difference between the two is the payment process. With a merchant cash advance, borrowers make daily payments based on a percentage of the sales made through credit card transactions. On the other hand, credit line borrowers make monthly payments which are based on the amount they have used and other fees or rates that comes with the agreement.