When it comes to financing a small business in Australia, it’s far from a one-size-fits-all situation. It really comes down to having options. Think of it in the same way you would select your outfit on any given morning. The same way you’d sort through your shelves and select the garment that makes sense given the weather and occasion. So too, you need to know where your business is going and what it should be wearing on the way. When you’re shopping for funds to dress up your business, what will you choose? A traditional business loan or a modern merchant cash advance (MCA)?

Slip on a tracksuit or fuss with a suit?

Some occasions allow for some flexibility while others call for something a bit more formal. Bearing this in mind, let’s think about a merchant financing versus a traditional bank loan. Both involve receiving and repaying sums of money, but that’s pretty much where the similarities end. Basically, a merchant cash advance isn’t a loan at all. It’s a buy and sell agreement between a merchant and a provider. Like a tracksuit, it’s a lot easier to slip into. This is because it is an unsecured product. So it is not governed by the same qualification criteria. Unlike a suit, bank loans like to be worn in a certain way. Meaning its terms will be a lot more stringent. So the question is, how ‘formal’ do you want your business loan to be?

Casual polo or dress shirt?

Now you need to understand varying terms and decide whether you prefer a more relaxed ‘polo’ option or a structured ‘dress shirt’. A merchant cash advance is like a polo tshirt – much more open. Its flexible terms allow repayments in line with your business’s turnover. This is so much more comfortable than a neck-to-navel ‘banker’s shirt’. Which will demand fixed repayments…whatever the weather.

Zipper vs. button-down

Putting up collateral to secure finance is like getting into a dress which is buttoned all the way down the back – hard to get into and a pretty big commitment. A merchant cash advance is more like a zipper option. It’s really easy to get in and out of, with quick approvals and unfixed repayment terms.

Made to order or off-the-rack?

There is nothing nicer than a made-to-measure blazer – it knows your curves. It hugs your frame. It’s so comfortable (that half the time) you don’t even know you’re wearing it. But, it can be pricier than a regular store-bought jacket. It’s the same with loan options. The merchant cash advance is more expensive because it’s a bespoke product with tailored and flexible terms that are unique to your business. Furthermore, repayments are processed through the card terminals automatically. Taking the form of a small, agreed daily percentage which is withheld from all card purchases until the loan is paid off. This incremental structure means that often merchants don’t even feel the unnecessary tug of the debt. A bank loan, on the other hand, is a cheaper off-the-rack option. But the fixed monthly percentage has a tendency to feel tight at times.

Cotton or stretch?

When it comes to prescribed use, a key differentiator between the two options is flexibility –  bank loans want to know exactly what you want to wear and where you want to wear it; applying a standard non-stretch ‘cotton’ approach to prescribed use. A merchant cash advance, however, has a far more ‘elastic’ opinion of a cash injection. This option allows you to use the funds for whatever you see fit.

Sandals or sneakers?

If you want to make the sunset, quickly slip on a pair of sandals and you can be on the boardwalk in 20. This is your merchant cash advance option – a quick slip-n-go option with lead times as fast as 24-48 hours from application to funding. This works well for last minute opportunities or emergency scenarios. If, however, you are able to think more long-term, a snug sneaker might be better suited. In other words, a bank loan might be a better long-term option. This is fine too, as long as you have the time and endurance to go the distance.

Cap or sunnies?

No lender will offer a cash injection without ensuring the necessary protections are in place. In terms of qualification criteria, a merchant cash advance looks at past behaviour as a predictor of future turnover. The provider will need to know about the previous 6 months of trade. As well as request access to all credit/ debit card activity. A bank, on the other hand, will fund a business at various life cycles. Each of these will require different stipulations and surety. Both caps and sunnies offer protection, so it really comes down to suitability.

What is the best fit?

It’s incredibly important to be as savvy with your funding partners as you are with your dress code. In the lending game, the idea that “you can never be too overdressed”, really doesn’t apply. It is easy to overextend yourself. So choose your partner wisely. Make sure your provider is responsible and understands your unique funding requirements. Ultimately the ‘good fit’ is between you and your lender.

For a tailor-made financing solution that fits your business, speak to a lending specialist on 1300 955 428

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