Bank loans are one of the most common types of loans a small business owner will use. But, just because something’s popular, doesn’t mean it’s the best way to go. We see this in life with lots of things; Cola, ice cream, and cake are popular but they cause long-term issues if taken in abundances like diabetes and cavities. The same can be said for a bank loan; in fact, the analogy is perfect.t At least after the tooth is filled, the pain stops and it can be done in one hour or less. With a bank loan, your pain seems like it’s forever because of the nature of the bank loan. Here we will compare these types of loans to non-bank lending in order for you to see it plainly.
The Nature of the bank loan
This is a simple quick explanation so you can see the difference between a traditional bank loan and other loans on offer. A typical banking loan normally comes from your own banking institution. It’s best if you apply for one from the bank you have your business account with. You’ll have less inconvenience but not less scrutiny. The first thing they’ll do is act like a parent with the investigations and questioning. They’ll see if you’ve been a good little customer and are in good standing. Then, they’ll want to know what they can use to pay the loan back. In other words, even though you have money in their bank that they can freeze at will if you become a risk, they want your assets too.
They give you the money up front and then you pay it back at a later date with interest. Sometimes they’ll give you a deal so that you don’t pay interest for a certain period of time. But, then, as soon as you need to start your payments, the stress starts too. The point is, there is no guarantee you’ll have the money if even one little mishap comes up unlike some of the better non-bank lending options available. This is no security blanket and it’s designed to go in favor of the bank from the start.
There are other choices for non-bank loans
The banking world has made it a part of their career to make sure that the general public is sufficiently scared of any loan that is not from what they call a proper financial institution. This is not something that holds a lot of weight. Today, non-bank lending is safe and very effective. One of the best ones is the MCA or merchant cash advance. There are several reasons why and we’ll explain to you how. The merchant cash advance, first of all, is not the typical cash advance that you use to pay a bill at a check-cashing store and then have this ridiculous interest. Plus, with those, you have to pay them back just like a bank loan. Why? This is a payday loan so don’t get that confused. A MCA is actually a line of credit and you repay it more like a credit card which is easier.
The way you handle a MCA is you offer up an agreed upon percentage of your future profits. This means you don’t have all this impending anxiety over a certain date that you have to start repaying it. The best part of it is, you know exactly what you’ll pay it back from; how easy is that!