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Owning a business can be a very rewarding endeavor. As the owner, you have the ability to make decisions and pursue opportunities to grow your business and foster future success. Unfortunately, not all of the decisions you must make will be easy ones. For example, a common challenge that business owners face is a shortage of capital.

This problem can arise for a number of reasons. Unforeseen repairs or other expenses sometimes occur and drain capital resources, making it difficult to meet payroll or other obligations. When this happens, you must be able to access the capital you need in order to remain operational.

There are two popular avenues that are often used by business owners to ease cash shortages:

Fortunately, either option will do the job; however, depending upon your particular business’ circumstances, the disadvantages that sometimes occur with one type of loan may outweigh the advantages and make the alternative choice the better option.

We will examine these types of financing options, explain how they work, and provide an objective review of the pros and cons of each type. It is our goal to inform and empower you to make the right decision for your business’ needs.

Merchant Cash Advance

These types of loans are originated as a part of an agreement between the business owner and the company that provides the processing of debit or credit card transactions for the business. While technically not considered to be loans, they behave in a manner similar to loans in that they provide funds to the borrower that must be repaid.

How It Works

In essence, a merchant cash advance allows the business to borrow money based upon future sales. The required funds are “advanced” by the provider to the business, either through the company’s credit care settlement account or based on their total deposits. The business uses the funds as needed, and repays the advance through daily credit and debit card transactions or via daily/weekly ACH. As customers use their cards, a small percentage of the sales go back to the merchant advance company as repayment.

There are typically three ways in which the advance can be repaid:

Of the three repayment arrangement cited above, the split withholding and ACH withholding are the most commonly preferred and used manner for repayment.


The advantages of using a merchant cash advance program are worth considering, especially for a relatively new business, or one that may be struggling with insufficient or bad credit. A business’ credit score or credit history plays no role in gaining approval of a cash advance. Since these loans are repaid through credit card sales, the volume of such sales provides the basis for approval of the advance.

Other advantages to consider include, but are not limited to:

If an advantageous situation presents itself, such as purchasing a new business or winning a new client, MCA gives you quick access to capital. This gives you the chance to act faster than your competitors who are stuck waiting for a bank to approve them or need time to raise the capital. Cash in hand a phone call away is a very powerful tool, which used correctly, can help separate yourself from your competition.


As the old saying goes, nothing is perfect, and this applies to merchant cash advances as well. As convenient as they are, they are not for everyone or every situation. For example:

Since they are not based on your credit they are not reported on your credit score, so do not help you build your credit. **In some instances they are reported on your business credit and do help build your business credit score.

Cash advances are maxed out on how much can be offer based on your gross revenue. Generally we are able to advance up to 15% of your gross annual sales. Banks will be able to loan higher dollar amounts because they do use collateral and take at least 30 days for underwriting. Not to mention the terms range from 5 -20 years so they have a longer time to collect.

The collection method is on a micro scale so we collect transactions in small frequent collection, either direct split from credit cards or a small daily or weekly ACH. Where banks collect once a month.

Bank Business Loan

The bank business loan has been the standard vehicle for borrowing money for the past several decades. It normally involves pledging business assets, such as equipment or inventory as security for the loan. This is to protect the bank in the event that the debtor defaults on the loan. Theoretically, if this happens, the bank would seize the collateralized assets and sell them, sometimes at auction, in order to recoup the funds necessary to pay off the loan.

Bank business loans have undergone some tremendous changes since the advent of the financial crisis that struck in 2007. During that time, a number of banks that had been financial fixtures before the crisis crumbled like a sand castle in the incoming tide due to a large volume of sub-prime loans that went into default. These loans were poorly collateralized, unsecured, or deemed high risk for other reasons.

Since that time, the Federal Reserve has imposed stricter criteria that banks must follow when generating loans, including business loans. While serving the purpose of protecting the banks against loss, these rules have also made it more difficult for some businesses to obtain the credit they need, especially if their credit scores fall below the required threshold or do not have enough collateral to pledge.

A popular method that many banks use for lending to small businesses is that of seeking a guarantee of the loans through the Small Business Administration (SBA). These loans must be executed in accordance with SBA rules, and failure to submit proper documentation can result in denial of the loan request. However, loans guaranteed by the SBA usually carry a very low interest rate.


There are definitely some advantages to choosing a bank business loan for your company’s financing needs. These advantages include, but are not limited to:


Bank business loans have their share of disadvantages as well as the advantages cited above. Some of these disadvantages include:

Choosing the Best Loan for Your Company

As a business owner, it is very likely that the majority of your time and energy is required for the day-to-day operations of your company. However, you still occasionally need to boost your capital with borrowed funds. Unless you are experienced or knowledgeable in the realm of commercial finance, you may be uncertain as to which avenue is the best choice for your company’s situation.

In instances like this, it is wise to partner with an experienced company, such as Excel Capital Management, that can help your business achieve its goals with affordable financing that best suits your company profile.

At Excel Capital Management we work hard for you, because your success is our goal. We understand the intricate details of commercial finance, and we put that expertise to work for you. Call today for a no-obligation consultation, and get your business on the fast track to financial stability today!