Does your business need a cash infusion? We’re here to help you decide whether a collateral loan or a merchant cash advance is better for your business. We promise to give you the facts only. Our business, of course, is collateral loans—but our business is also to support you, and that means sharing an unbiased comparison so that you can make an informed decision that suits your unique situation.
What is an MCA?
First, a brief introduction to the merchant cash advance also called an MCA. MCAs are a common solution for business owners who find themselves short on funds. An MCA is not a loan but an advance on future sales as determined by a lender based on your business’s average monthly credit and debit card transactions. There is no standard payment schedule with interest as you would see with a traditional business loan. A fixed percentage of revenue goes to the lender each month for repayment.
Compared to a traditional business loan, an MCA is faster and easier to obtain, in most cases. However, an MCA is often the most costly option. For businesses who need a quick jumpstart, it’s easy to see why an MCA might be appealing. But perhaps they’re missing out on an even better solution, the collateral loan.
How Does a Collateral Loan Compare to an MCA?
We are sincere in saying that many businesses who opt for an MCA would be better off with a collateral loan, provided they have enough value in acceptable assets to put up as collateral. Let’s take a look at the facts to understand why.
1.
A collateral loan is much easier to secure than an MCA. You just need to book an appointment to bring us your asset, sign a quick contract, and receive your cash payment.
2.
You’ll receive your funds faster with a collateral loan. At Qollateral, we provide an instantaneous cash or bank wire transfer payment. No MCA can come close to a same-day payment.
3.
Your revenue remains untouched. With an MCA, you’ll be taking a hit regularly as your advance is repaid. With a collateral loan, you don’t have any payments to make. You simply pick up your asset when your business is financially ready to do so.
4.
A collateral loan is anonymous. Nobody is up in your literal business, reviewing your financials for a collateral loan. Your loan amount is based uniquely on your asset’s value, not your ability to repay. To obtain an MCA, your lender will be required to look over your financials and determine your advance and repayment percentage accordingly.
These are the 4 key reasons you would want to consider a collateral loan instead of an MCA. As you can see, the collateral loan has some significant advantages.
Is an MCA Ever Better Than a Collateral Loan?
Now, in the spirit of transparency and fairness, let’s examine why you’d choose an MCA over a collateral loan. There are two distinct scenarios where you’d want to go with an MCA and not a collateral loan.
1.
You do not have assets of great enough value to meet your business’s financial needs. You can check out our list of acceptable collateral assets here. It’s not an exhaustive list, so we encourage you to reach out if you have any questions.
2.
You are unsure about the ability to repay your loan and reclaim possession of your asset, and you do not want to risk losing your asset. Perhaps your business doesn’t yet have the longevity to determine its estimated financials down the line, or you’re taking a calculated business risk, or you’re hoping to resuscitate your business with a cash infusion but are uncertain of the outcome. The bottom line is that if you are unsure and unwilling to risk the loss of your asset, a collateral loan isn’t going to be the right option.
We hope this helps you make the right decision for your business, and should you decide to opt for a collateral loan we hope you’ll choose Qollateral, NYC’s Best Pawn Shop.
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