When your business needs funding, the options can be overwhelming. From bank loans to alternative financing, it’s essential to choose the right solution for your goals. One popular funding option, especially for small businesses with steady credit card sales, is a merchant cash advance.
In this guide, we’ll break down the differences between merchant cash advances and traditional loans—and help you decide which is the better fit for your business.
What Is a Merchant Cash Advance?
A merchant cash advance (MCA) is a type of business financing where you receive a lump sum of capital in exchange for a portion of your future sales. Rather than fixed monthly payments, repayment is made through a percentage of your daily or weekly credit card transactions.
At Wise Advances, we offer flexible merchant cash advances designed for business owners who need quick access to capital without the lengthy approval process of traditional lenders.
What Are Traditional Business Loans?
Traditional loans are typically offered by banks and credit unions. They involve a strict application process, credit checks, financial documentation, and collateral. If approved, the borrower receives a fixed amount and repays it in monthly installments with interest over a set term.
While traditional loans often offer lower interest rates, they can take weeks to get approved and funded—making them less ideal for businesses that need fast cash flow.
Key Differences Between Merchant Cash Advances and Traditional Loans
1. Speed of Funding
- Merchant Cash Advance: Funds can be available in as little as 24–48 hours.
- Traditional Loans: Approval can take several weeks.
2. Credit Requirements
- MCA: Approval is based more on revenue and sales volume than credit score.
- Bank Loans: Good to excellent credit is often required.
3. Repayment Terms
- MCA: Flexible, based on sales. Payments adjust depending on your revenue.
- Traditional Loans: Fixed monthly payments, regardless of business performance.
4. Paperwork & Requirements
- MCA: Minimal paperwork and no collateral required.
- Bank Loans: Extensive documentation and collateral may be necessary.
When Should You Choose a Merchant Cash Advance?
You might want to consider a merchant cash advance if:
- You need fast access to capital.
- Your business has steady debit/credit card sales.
- You’ve been denied by traditional lenders.
- You want a payment structure that adjusts with your cash flow.
Our clients at Wise Advances often choose an MCA when they need to cover short-term expenses, purchase inventory, invest in marketing, or handle unexpected repairs. Learn more about how our merchant cash advance works.
When Is a Traditional Loan Better?
Traditional loans can be a better fit if:
- You have strong credit and financials.
- You can wait several weeks for funding.
- You prefer long-term, lower-interest debt.
While traditional loans might offer more favorable terms over the long run, they aren’t always accessible or practical for all small business owners.
Final Thoughts: Choose What’s Best for Your Business
Both funding options have their benefits. The right choice depends on your business’s financial health, urgency, and flexibility. If speed, ease of approval, and adaptable payments are what you need, a merchant cash advance from Wise Advances could be your ideal solution.
Need help deciding? Get a free consultation today and see how Wise Advances can support your business goals.
