Merchant Cash Advances vs. Business Line of Credit—A Guide for Small Businesses in NYC

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Cash laid out on a table

Getting the right type of funding is a crucial part of running a small business. Both merchant cash advance and business lines of credit are popular among small businesses due to their flexibility, convenience, and lack of strict requirements. If you’re unsure which loan will be right for you, here’s a detailed guide to cash advance and line of credit that can help.

Overview of Merchant Cash Advance

A merchant cash advance is a type of loan that doesn’t require a minimum credit score or collateral. It’s ideal for small  to medium businesses with short or average credit history and limited assets and earns their primary income through credit/debit card sales.

The repayment structure of these loans is highly convenient as compared to other loans. You only have to pay a certain percentage of your future card sales. So if you’re business isn’t performing well during the off season, weakening sales wouldn’t be burdensome as you pay just a little amount of what you earn.

To qualify for an MCA loan, your company should have at least three months of trading history, monthly credit card sales of $35,000 or more, and $7,500 or more in gross monthly sales. When you apply for this loan, lenders will get back to you within a day about your application status. Once approved, you’ll get your funds within 3 days.

Business Line of Credit Loan

A business line of credit (LOC) loan is like a credit card for your business. It gives you access to a certain amount of funds that you can withdraw on as-per need basis. Getting this type of funding can be a strategic move to overcome cash flow issues in the future or fulfill short-term business needs.

You can get both secured and unsecured business lines of credit. As their name suggests, the former requires you to put down assets as collateral while the latter doesn’t.

To qualify for a LOC loan, your business should have a good financial history with no open bankruptcies. Qualifying for this loan is quite easy as long as you can prove your capabilities to pay back the borrowed amount. Moreover, you will need to submit financial documents along with a business plan.

Cash Advance vs Line of Credit—Which One Should You Get?

A merchant cash advance loan is quick, convenient, and comes with many flexibilities. It’s good for new and small businesses as the repayments of this loan tend to reduce as your sales reduce. However, due to all these conveniences, you have to pay a higher interest rate than a business line of credit.

A business line of credit is a great option for all kinds of business owners who prefer to avoid potential risks and stay one step ahead. It comes with a lot of flexibility, as you have the freedom to use the funds for any type of business needs, whenever you wish.

It also has a lower interest rate than an MCA loan, even lower if you opt for secured LOC financing.

Two people in a meeting

If you’re still not sure which loan to go for, schedule a consultation with Whitestone Fund. We will work with you to understand your needs, business type, goals,  etc., and will create a personalized financing plan for you. Our team has adequate experience working with a wide variety of businesses in NYC, and we’d love to help you.

You can get both merchant cash advances in NYC and business lines of credit in NYC financing at our firm. That’s not all; we also provide small business loans and working capital loans in NYC. Contact us for more details.

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