Merchant Capital

Why a merchant cash advance is better than crowdfunding

Shiny new funding models pop up everyday and so it’s difficult to know which small business loan is right for you. Crowdfunding is one such concept. Here you pitch a concept to entice online ‘community’ investment in your business and interested individuals chip in until the required amount is reached. This type of funding normally results in lots of small amounts from many contributors rather than one large lump sum from a solo investor. A cash advance however, is a single guaranteed sum of money from one lender that can then be used at the business owner’s discretion. So why is a cash advance really the better option?

Crowdfunding takes a lot of time
Because of the way the crowdfunding system works, you will probably find yourself in a really long-winded process that involves a tedious process of: Pitch + launch + advertise + tag + post + repeat. Then you wait for interest to peak and for money to start trickling in. This is the nature of the crowdfunding game. The process can take anywhere from weeks to months (or more) to raise the full amount required. With a cash advance however, the money could be in your account within 48 hours from application.

Crowdfunding is far from free
In order to entice investors you need to offer compensation in some form or another. Often this means offering a stake in your business or profits down the line. This means that strangers now have a say in how you run your company or else you’re indebted to them for a certain amount of time down the line. You’re an entrepreneur… why would you want a boss?

Furthermore, the platform your crowdfunding campaign is run on also requires payment – mostly in the form of a percentage of earnings. This could result in the fees turning out more expensive than the cost of a cash advance. While a merchant cash advance is certainly not the cheapest funding on offer, you are paying this premium for speed, convenience, transparency and not having to put up collateral.

Crowdfunding requires enormous effort
Crowdfunding requires constant campaign promotion until the full funds are raised. Weeks and months of promotion is a lot of effort that could be going into growing your business. If you are a start-up with no business plans then this may be your only option to raise money. However, if you’re a retail business with a trading history of more than 6 months, then there are far better options out there for you – a cash advance is high up there.

Also bear in mind that tons of people are crowdfunding their businesses, often leaving you lost in a sea of proposals. This means you need to advertise and promote your idea to stand out. This could mean writing press releases, doing paid advertising campaigns and tons of networking to spread the word and market your idea. This is not only time consuming as mentioned, but its pricy too. With a merchant cash advance however, you don’t have to spend money to make money.

You risk exposing your brilliant idea
You’re probably raising funds for an amazing new concept. Here’s the problem – to entice interest you need to fully explain the concept in order to entice contribution. This means exposing your idea to competitors who may already have the funding to put it into action before you get a chance.

Crowdfunding success is rare
The truth is it’s actually unusual for a crowdfunding campaign to find real success. Only 10% of these projects ever see real triumph. As apposed to 70% or more of cash advance proposals, which are approved. Many merchant cash advance lenders have higher approval rates, even when dealing with industries that are often off limits to traditional lenders and conservative crowdfunding platforms.

The bottom line is that while crowdfunding may be right on trend, it most likely isn’t the right option for your business funding endeavors. So for a more predictable, practical and simplistic way of getting a quick cash injection for your retail business, look at a merchant cash advance. After all, it’s popular for a reason.

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