Merchant Cash Advance Blog

Key Pros and Cons of Merchant Funding

   Thursday, 24 August 2017 10:38 PBC Blog

pros and cons

Every form of business funding has its advantages and disadvantages. Before you borrow a business loan, it is important that you understand the benefits and constraints that such a commitment might have on your business. Understanding these things might mean the failure or survival of your business in the long run.

Merchant funding is one of the most popular forms of business financing today. Despite the appealing features of this form of business funding, there are some disadvantages that you should also consider.


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Advantages of Merchant Funding  

•    Disregards credit records

Merchant loan providers rarely consider your credit score before lending. In fact, even business with bad credit can get funding from merchant cash providers, as long as they meet the other requirements.

•    Simple and fast application process

This is one of the most appealing aspects of this kind of funding. You can apply for the business loan from a merchant cash advance online. The rigorous vetting, as is often the case with banks, is not there. Once the providers are satisfied your business can repay the advance through credit card transactions, then the application is almost done.

Once your business qualifies for funding, the money is processed into the business account within the shortest time possible, sometimes even hours.

•    Flexible loans

Merchant funding terms have fewer restrictions compared to bank loans. The lender can offer your business small amount of cash considered too low by banks. Also, you can use the money on any business operations you wish.

Concerning repayment, the lender only deducts an agreed upon percentage of future credit sales. Repayments vary in response to your credit sales volume hence, you do not need to worry about meeting deadlines.

•    No collateral needed

Merchant funding providers back their money on the future credit sales of your business. Therefore, you will not lose your personal or business assets in case your business fails to pay back.


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Disadvantages of Merchant Funding

•    High-interest rates

Funding providers charge higher interest rates than the other financial institutions. This is due to the higher risks associated with this method of financing, including such as lack of collateral and higher approval rates.

•    Customers are not encouraged to make cash payments

Encouraging your customers to use the cash payment option instead of their credit cards can be regarded as breaching the lending contract.

•    Switching credit card processing companies

Funding providers will also prohibit making a switch to another credit card processor to protect their interests. This is despite your satisfaction with the credit card processor that you might be using at that moment.

It is important to understand that terms of contract vary from one merchant funding provider to another. Therefore, you should review attractive merchant cash providers carefully before you choose the one you’ll use.



We provide two highly accessible financing programs that can get your business the working capital it needs in days instead of months.

For a small business, obtaining a traditional loan today is a complex and difficult process. That’s where Premier Business Capital comes in. 

Merchant Cash AdvanceACH Loans 


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