Over the years merchant cash advances have built a reputation of desperate business owners looking for money with high-interest rates. But this is far from the truth, as it all depends on your profit margins and your plans for utilizing the deployment of the working capital. The common misconception is the high-interest rate over 6-12 months which is the usual terms offered for Merchant Cash Advances, but if you were looking at an average business loan the offer you will find out it is worse Let me explain for instance a bank loan for 36 months, prepayment penalty, and 19% APR equates to 57% interest over 3 years and prepayment penalties ranging from 5%-15%. On the other hand, you have the merchant cash advance, a loan that is 8 months at 35% interest rate, no prepayment penalty, and renewals when the loan is 50% paid down. When you compare the two the merchant cash advance is better because business moves fast, and you shouldn’t need to utilize the capital for more than 6 months in most cases. Not to mention that the interest is tax-deductible. If you were to compare a bank loan, you’re stuck with it for 3 years, you already paid and invested in what you wanted but you’re left with no additional capital and a big prepayment discount. Another misconception is the daily or weekly payments of a merchant cash advance compared to a bank term loan is that a merchant cash advance’s daily/weekly schedule and a bank loan is at a monthly frequency. The census of default rates for a bank loan at a monthly payment frequency is actually 25% higher merchant cash advances whose schedule repayment is daily or weekly. Why is this the case? Because business moves fast when it comes to the inflow and outflow of capital. A daily or weekly schedule allows the business owner to keep better track of the repayment schedule so he or she can better strategize the inventory, material, or service that needs to be invested into helping the company grow. Merchant cash advances when used responsibly is highly beneficial because it is working capital to strengthen a business owners cash flow. This 30-year industry wouldn’t be here this long if it weren’t for the benefits that it provides for small business owners to handle in their day to day operations.

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