Small Business Loan / Merchant Cash Advance VS. Traditional Bank Loan?

There are considerable differences between these 2 financial instruments. Below is an illustration of the basic differences:

Here are the differences between the Microbusiness Loan and Merchant Cash Advance compared to the traditional bank loan:

What is the Difference Between a Small Business Loan and a Traditional Bank Loan?



Micro Business Loan

Merchant Cash Advance

Traditional Bank Loan

Compounding Interest  Yes No Yes
Fixed Payments Yes No Yes
Late Fees No No Yes
Pre-Payment Penalties No  No  Yes
Pledged Assets / Collateral No  No  Yes, often the residence
Personal Guarantees No  No  Yes
Pre-Approval Yes, 24 hours  Yes, 24 hours  No
Time to Fund 1-7 Days  1-7 days  60-120 days
Current Environment Yes, easy funding  Yes, easy funding  Next to impossible
Costs Fixed amount  Fixed amount  Variable, All in: 12-24%
Credit Score Considered, not primary  Considered, not primary  Above 720 
Required Documents Basic application and processing agreement Basic application and processing agreement  Substantial


If you have or your intention is to obtain a traditional loan or line of credit, that's great. As a business owner, you know the more borrowing power that you have the better. These financing options aren't in competition with bank loans, so to speak. Often, they work in conjunction to achieve the business owner's goal or overall objective. These types of loans often complement one another.

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