Merchant Cash Advance or factoring are two financing options that SMEs can consider if they want to obtain resources, but it is important to know so that they know which is the most convenient, according to their situation.

It is important to consider that according to estimates, more than 60% of people who decide to start a business have their business as their main source of income, this is reason enough to want not only to keep it afloat, but to make it grow as quickly as possible. and for that it is useful to have a financial strategy that involves the use of credits, for which it is key to know the alternatives that are available, and in this article the two already mentioned will be addressed.


What is Merchant Cash Advance?

The MCA, or merchant cash advance, is one of the ideal sources of financing for those young ventures that require immediate capital, either to cover short-term expenses or lack of cash flow.

It is an online financing option that consists of the purchase of future sales, via credit or debit card, by a financial institution.

It works like this:

The financial entity gives a number of resources to a business quickly, and a percentage of sales is determined that will be used to pay that amount, plus a certain fee.

This results in financing payments, depending on sales, being variable, and payment terms flexible. In other words, the more it is sold, the faster the debt can be settled, and that also means higher profits for the company. It’s a “win-win”.


What is Factoring?

On the other hand, there is this other type of financing. Factoring or factoring is essentially the transfer of invoices from an SME to a financial institution, in exchange for obtaining capital at the time.

It works like this:

  • A hypothetical situation can be considered in which a company makes a sale and receives an invoice, which is due in 90 days, however, the company needs the resources at the moment.
  • The company “sells” that invoice to a bank or factoring entity, which pays it a percentage (not the full amount) of the amount of money the invoice is equal to.
  • In this way, the company obtains immediate resources, and the client who was supposed to pay that business will now pay the total value of the invoice to the financial institution.


Which of the two sources of financing is better?

Although it all depends on the financial strategy, and although it is clear that the factoring alternative is a good option, the MCA shows very attractive advantages, among them are flexible terms, not having to comply with a fixed payment, no collateral required, fast approval, and no need for a strong credit score.

On the other hand, factoring has disadvantages such as: a lower approval rate, a long average approval time (compared to the immediacy of MCA), and the fact that if the customer who must pay the invoice to the financial institution does not If you do, the company that sold that invoice must be held responsible for the debt, something that can leave that business in a delicate situation.


The financing option of Pymes Capital

Therefore, if you require resources for your venture, MCA online financing from Pymes Capital do not compromise the peace of mind or stability of your company, in addition to not demanding complex requirements.

To request this financing, it is enough to fill out an online form, at any time, from anywhere, and you will have the answer in a day at the most.

With Pymes Capital, you will have the resources you need immediately, without complicated payments or deadlines.