Small Business Loan vs. Cash Advance: What’s the Difference?


Most of us follow the traditional loan methods to fulfill our needs for business funds. There are many other sources available to help you with opportunities that come to your business. Businesses that accept challenges and meet the trends grow at a rapid speed. But for that, you need sufficient funds. Be sure to have enough funds so that you can manage your cash flow easily. Small business loans and merchant cash in advance are some easy options that offer a good amount at convenient terms.

Many people have confused about both funding platforms. Cash in advance somewhere sounds the same as a business loan but there are many differences in the terms and conditions of both. It depends on your fund requirements, payback methods, and other
preferences when you chose a particular source. The below-mentioned explanation will surely help you to understand both funding sources and differentiate them. Once you identify the usage of each according to your purpose you can recommend one to others as well.

What do you mean by small business loans?

Small businesses have to do much more hard struggles than large businesses. The competition level is similar and they have to manage promotion, manufacturing, and other costs with a small budget. Large businesses get good support from banks and other funding sources. To help and strengthen small businesses, small business loans are now also available. The terms and conditions, rate of interest, and EMI options are so convenient for the borrowers. SBA loans are also known as small business loans. Sometimes, you may get approval on your loan application in just 7 days. The customized EMI option helps you to set your paybacks at your convenience. Also, the borrower can use the borrowed amount for any type of business expense or investment. This option saves you from strict qualification requirements against the loan application approval.

What do you mean by cash in advance?

We just discussed what a small business loan is. Now let us understand what is cash in advance.

When you get some cash before delivering a particular service or product is called cash in advance. There are different types of cash in advance options available. You may apply for cash in advance from the credit card option. Merchant cash in advance is also an easy option of funding for small businesses. Your merchants may give you a lump sum amount based on your upcoming sales. The statements of different merchant cash in advance providers may vary as per their prospects. Some of them consider it a financial product despite of loan. They set a fixed schedule and installment that depends on the advance money and payment duration. Maximum times the installments are so frequent. They charge the factoring rate at the place of interest rate. There are so many options available to get cash in advance. When businessmen fail to get loans from banks and other sources they like to choose this option.

Business loan Vs. cash in advance

After understanding both options, there is one thing that may confuse you. You want to know which one is the best and what is the difference between them both. You may apply for a small business loan and cash in advance according to your suitability. Both options are great at their respective place. Let us have a look at the differences between a small business loan and cash in advance:

  1. The difference is based on cost: If you are not enough mature to keep the merchant cash in advance cost low don’t use this option. The interests, charges, and fees of MCA keep fluctuating. Be very clear about all the terms on paperwork before finalizing the deal. Total price tags of cash in advance are also found to be much higher when compared with small business loans. With a small business loan option, you don’t need to be worried about the flexibility of the charges, fees, and interests. In case you have taken the MCA option then also keep shopping for a better option and go for it to save yourself from financial risks.
  2. Fund support and paybacks: You can not stay engaged in applying for fund help again and again. There are many expenses and investments that you want to complete with your one loan application. In such conditions, business owners love to apply for a small business loan. The reason behind that is the comparatively higher approved amount and long-term installments. MCA will never offer you a long-term installment for easy paybacks. They want to get quick returns that can arise a little discomfort for you to manage business expenses along with too high installment.


Easy options are always good better, but decisions taken in hurry may lead to big inconvenience in the future. So do a proper investigation before you go with an option. Handling a business is already a task full of challenges. In such a situation try to enter the sources with a clear path rather than a mess. While comparing these two options small business loans win the battle. If your business fund requirements differ, you may go with the MCA option also.

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