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Home > Finance > Merchant Cash Advance > No Collateral Is A Good Thing When It Comes To A Merchant Cash Advance

No Collateral is a Good Thing When it Comes to a Merchant Cash Advance

For business owners, life and business can be the same thing. This can be dangerous if personal collateral--such as a home--is used to secure business funding. Merchant cash advances do not demand personal collateral like most other forms of business funding.

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People who work for someone else all their lives never know the unique pleasures of being self-employed, but neither do they encounter the unique risks entailed.

For better or for worse, a business owners life is intimately connected with a business owners business. In fact, in many instances, life and business are one and the same for a hard-working business owner--not only in the emotional sense, but the financial one as well.

Merchant cash advances are an interesting business funding option because they allow business owners to grow their businesses without putting their personal finances at stake.

A Common Story: Home Posted as Collateral for a Business Loan
Home equity or other cash out refinance products can be a great business funding solution for certain business owners. The interest rates on such loans are typically quite low, repayment terms are lengthy, and the interest paid is tax deductible.

However, a home loan that is really a small business loan carries a big risk with it: if the business goes away, the house can go away, too. The bank can foreclose on the house to recover the home loan that was really a small business loan.

Needless to say, this can lead to some truly tragic situations.

No Collateral Needed--Why Not?
Collateral has been an essential part of lending since the dawn of time. Without posting any collateral, it is feared, a borrower can simply not repay the loan and then walk away, leaving the lender with nothing.

How, then, can merchant cash advance companies offer business funding without demanding any collateral? Whats changed? Why do merchant cash advance companies provide unsecured business loans when others wont?

First, in todays world, information is more available, and its easier to determine which businesses are and which businesses are not creditworthy. Merchant cash advance companies view this issue through the measurable tally of credit card sales, which are easily verifiable.

Second, payment is non-optional once the agreement is entered into. Payment takes place directly through the credit card payment system, assuring merchant cash advance lenders that they will be repaid (as long as the business is processing credit card payments).

Credit history information and direct repayment through credit card sales are two big reasons why unsecured business loans are possible for todays entrepreneur.

The Right Business Funding for the Right Business Situation
A merchant cash advance may not be right for every business funding need. Sometimes, a small business loan through a bank or even a home loan can make sense. Often, business owners will tap various types of financing throughout the life of a business.

Building a successful business is all about making choices. A small business loan obtained through a merchant cash advance is one tool in the toolbox. The ability to receive business funding without posting personal collateral makes this tool unique and valuable.

Source
The Green Sheet


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