Debt Relief Specialist and client

Alternatives to Merchant Cash Advances

Small businesses need funding to grow. While merchant cash advances can provide working capital for payroll, new equipment, remodeling, and other business investments, there are alternatives, from traditional business loans to microloans. Let’s take a look at some of the funding options available to small businesses. 

Term Loans

Term loans are well-suited for capital investments and long-term projects that require a predetermined amount of funding. Commercial banks are the primary source for term loans that typically involve monthly payments for 2 to 5 years or longer, and interest rates ranging from 5 to 10 percent. These loans have strict borrowing requirements and impose late fees and prepayment penalties. Term loans also require business and personal assets as collateral, which can be seized by the lender in the event of default. 

Lines of Credit

A line of credit is a convenient financing option when your business needs capital every so often. 

This arrangement gives you access to funding when you need it, up to your credit limit. Also, you only pay interest on the amount you use. Once you repay what you have actually used – plus interest, you have access to the full amount of financing again. Lines of credit are best used for short-term financing and working capital needs.

Business Credit Cards

Entrepreneurs who need capital for short periods of time often rely on business credit cards. To qualify, you need to have adequate income and good credit scores. At the same time, a business credit card may help to improve your business credit rating.

Vendor Financing

Suppliers or vendors may offer to extend payment terms. For example, a net-30 term will give your business 30 days to pay for purchased goods. This gives your business funds to develop a product or service, which can be paid back from future cash flow. Vendor financing may also help to establish business credit, which may help to qualify your business for additional financing.


Crowdfunding for small businesses provides multiple paths to funding which allows your business to offer products/rewards in exchange for financial support or equity in exchange for an investment. 

Equipment Financing or Leasing

If you need equipment for your business, equipment financing or leasing allows you to pay for it over time through future cash flows. You can use this financing option to purchase or lease any physical asset, such as a restaurant oven or a company car. 

Invoice Factoring 

Invoice factoring involves selling your invoices to a factoring company at a discounted rate so you can quickly obtain financing. Invoice factoring can provide your business with working capital to pay employees and vendors, and reinvest in business operations without having to wait for customers to pay their invoices in full. 


Microloans are smaller loans that are an option for new businesses and startups that have a thin credit history and do not qualify for a traditional business loan. But these loans can be hard to find because many are only available in specific geographic regions. 

The Takeaway

There are a variety of funding options available to small businesses besides merchant cash advances. But if you have already taken a merchant cash advance and are struggling to meet the payment terms, you face the potential of defaulting, which will place both the business’s assets and your personal assets at risk. By working with an experienced debt relief specialist, however, it may be possible to reconcile your merchant cash advance.