This question depends on what type of business loan you’re referring to. Some Business Cash Advances are actually contracted as a true loan agreement, whereas others are contracted as a “Purchase Agreement” on your future receivables. There is little to no difference between the two aside from contract verbiage.

However, if you’re referring to a traditional term loan, such as one offered by a bank there are many differences. A business cash advance will enable you to fund your business within just 24-48 hours, however it does carry with it a higher cost of capital for the convenience factor and less stringent underwriting. Business Cash Advances are much easier to qualify for than traditional loans, and they’re completely unsecured which means you won’t have to pledge your home or any assets against the advance. The fact your future receivables are taken into account during the underwriting period gives the funder/lender enough comfort in extending capital without the need for collateral.

A Business Cash Advance is priced in a “factor rate” or what our team likes to refer to as a “multiplier”. For instance, a factor rate of 1.25 means that your payback amount is 1.25X of your approval amount. There is often no interest to be calculated on a Business Cash Advance because in many cases it’s not a loan. However, if it is offered through a true loan agreement, there will be an interest rate equivalent found within the agreement.

The average factor rate for a Business Cash Advance is 1.20 – 1.35, however rates can start at just 1.06 and go up to 1.49.

A Business Cash Advance is a short-term working capital instrument for businesses, priced in a factor rate, with terms ranging from 3 months to 24 months. Payments are made automatically by ACH in a daily or weekly fashion. In some cases, a retail merchant may use their credit card receipts (a certain percentage thereof) to repay the balance predictably over time.

Capital Collab has created the most robust marketplace of private lenders and Business Cash Advance funders. With over 200 lending relationships, we utilize our platform to match your business criteria to the right source of funding and obtain the best rates and terms.

Our friendly staff of 30 is based in Kansas City and we only hire staff members who have experience as a B2B consultant or who have been an entrepreneur themselves. This ensures we’re always putting our best foot forward and advocating on behalf of your business and its goals!