Recently a potential client of ours said he was trying to decide between a merchant cash advance loan or invoice factoring to fund his business expansion. Both funding sources have benefits, but there are some key differences to keep in mind if you find yourself facing a similar decision.
A merchant cash advance is essentially a short term loan and is best suited for retail-based businesses. Some companies classify it as a “sale of future credit card sales,” which shields them from interest rate limits that can range from 10 to 100 percent. The benefits are immediate cash and an easy application process. However the bottom line is that a merchant cash advance is a process that creates debt and must be repaid, typically through a percentage of future credit card sales.
Ultimately, this prospect chose invoice factoring over a merchant cash advance and became a valued client of ours. They chose our services because invoice factoring is not a loan and creates no new debt. There is no money to pay back, ever. After an equally easy application process, funds are deposited immediately based on the value of your accounts receivable submitted. Perhaps the best benefit to invoice factoring is that the financing line increases as your business grows.
When you chose Universal Funding as your invoice factoring company, rates will start as low as 1% and don’t vary from month to month. You will also be provided with business advice, tax help, credit checks on new customers and the option to obtain A/R insurance. These are additional services that you will have immediate access to upon financing your receivables with Universal Funding.
Choosing the right form of business financing ultimately determines a company’s success. If you’re considering a merchant cash advance or invoice factoring please contact us today at 1-800-450-6035 to determine what is best for your funding needs.