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Business loans and merchant cash advances also known as business cash advances are two different types of business finance options. Although they both provide instant working capital, they differ in many ways. To help you understand the differences between a business loan and merchant cash advance, we compare the two, looking at how they work, how you qualify and when to consider them.

How it works

Both business loans and merchant cash advances provide working capital, enabling businesses to grow. They can help businesses expand, refurbish, purchase new equipment and attract new clientele, but how do they work differently?

A business loan is a lump sum loan in return for fixed repayments (equal in amount and frequency), whereas a merchant cash advance is a lump sum advance in return for a percentage of daily credit/debit card sales (daily repayments that vary in amount).

How to qualify for a business loan

  • You must have been in business for at least 2 years
  • Have a positive daily bank balance
  • Have acceptable credit
  • Have no excessive loans, open judgments or bankruptcies

How to qualify for a merchant cash advance

  • You must take card payments
  • Have been trading for 2 years or more
  • Have monthly turnover of at least £6,000
  • Have monthly card sales of at least £3,000

When to consider

It is best to consider a business loan when your business is well established and profitable, ideally for B2B companies. If you have been in business for at least 2 years and have a stable cash flow, it is best to consider a business loan if you want stable repayment terms.

A merchant cash advance on the other hand is better for B2C companies who don’t want a loan on their credit report. If you run a seasonal business, it is worth considering a merchant cash advance as your cash flow will fluctuate. That way your repayments will depend on your daily sales, so if there is a dip in cash flow, you don’t have to worry about a fixed repayment amount as your repayments will reflect your business performance.

Boost Capital offers these two different types of business finance. Small Business Loans and Merchant Cash Advances, can be extremely beneficial to businesses who need funding fast. So far, our finance solutions have helped over 20,000 businesses in the U.K, U.S and Canada secure the funding they need to grow. Since 2002, we have lent over £1.2bn to small businesses operating in more than 400 industries.

If you’re considering a business loan or merchant cash advance, we can tell you if you qualify instantly and help you make the right decision for your business. We can give you the step up you need, giving you the time to focus on growing your small business. Apply in seconds, or if you have any questions, get in touch on 0800 138 9080 to speak to a member of the team.

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Speak to a member of our business loans team on 0800 138 9080

More businesses than ever before are looking to Boost Capital for their business financing needs. To learn more about how our UK small business loans work or to explore the business financing options that are available to you, contact us today!
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