Same Day Business Loans: Merchant Cash Advances and Factoring

Same day business loans provide quick access to funds for businesses in need of immediate capital. These loans can be a lifeline for small businesses helping them manage cash flow, seize opportunities, or cover unexpected expenses.

This article will focus on two types of same day business loans offered by Leasefunders.com: Merchant Cash Advances (MCAs) and Accounts Receivable Financing (Factoring).

Merchant Cash Advances (MCAs)

Understanding Merchant Cash Advances

A Merchant Cash Advance (MCA) is a type of financing where a business receives a lump sum payment in exchange for a percentage of its future credit card sales. Unlike traditional loans, MCAs are repaid through a fixed percentage of daily or weekly, or even monthly (if you qualify) credit card sales until the advance and fees are fully repaid. This means that repayment amounts fluctuate with sales volumes, providing flexibility during slower periods.

They are considered same day business loans because they can be approved in a few hours of submission.  If you get all your supporting paperwork in, there is a chance you can fund the same day that you apply.

This type of business funding has become very popular because of its speed and easy approval requirements.  Unlike SBA loans which require a lot of paperwork, good credit, and a down payment.

Benefits and Drawbacks

• Benefits:
  • Quick Access to Funds: MCAs can be approved and funded in as little as 24 hours.
  • Flexible Repayment: Payments adjust based on sales, making them easier to manage during low-revenue periods.
  • No Collateral Required: MCAs do not require collateral, reducing risk for the business owner.
  • Flexible Credit Requirements: One of the reasons why this type of financing is so popular is that it has very flexible credit requirements.  Since the loan is secured by future credit card sales, the issuing banks are comfortable with lending to business owners with bad credit.
• Drawbacks:
  • Higher Costs and Fees: MCAs typically come with higher fees and interest rates compared to traditional loans.  However, if you are an established business with good personal credit (above a 640) we have a bridge loan at 8.9% which is a great alternative to merchant cash advances.
  • Impact on Cash Flow: The daily or weekly deductions from sales can strain cash flow, especially during slow periods.

MCAs for Start-up Businesses

Eligibility and Requirements

Start-up businesses seeking an MCA must demonstrate a minimum level of credit card sales, usually over a few months. This shows lenders the business’s ability to generate revenue and repay the advance. Required documentation includes business bank statements, credit card processing statements, and identification.

Application Process

• Steps to Apply:
  1. Research and choose an MCA provider.
  2. Gather necessary documentation (business bank statements, credit card processing statements, identification).
  3. Complete the application form.
  4. Submit the application and await approval, which can take as little as a few hours.
  5. Upon approval, review the terms and sign the agreement.
  6. Receive funds, typically within 24 hours.
• Tips for a Successful Application:

• • Maintain clear and accurate records of credit card sales.
  • Be prepared to demonstrate the potential for future sales.
  • Ensure all documentation is complete and accurate.

Pros and Cons for Start-ups

• Advantages:
  • Quick access to necessary funds to kickstart operations.
  • Flexible repayment linked to revenue, reducing financial pressure.
• Challenges:
  • Higher costs can be burdensome for businesses with tight margins.
  • Risk of cash flow issues if sales do not meet projections.
  • In most cases you must be in business at least 4 months.  So, for brand new businesses, MCA financing is not an option.  If possible, they should look into invoice financing aka factoring.

MCAs for Established Businesses

Eligibility and Requirements

Established businesses are more likely to qualify for MCAs due to their consistent sales history. Requirements typically include a minimum monthly credit card sales volume and a certain time in business, usually six months to a year.

Application Process

• Streamlined Application for Established Businesses:
  • Established businesses can leverage their consistent sales history to secure better terms and faster approval.
  • Steps are similar to those for start-ups but with a focus on demonstrating stable and substantial sales.
  • Revenue requirements: Vary based on the funder
  • Time in business requirements: Generally, to be considered an established business and qualify for the better rates you should be a minimum of 1 year in business.
  • Loan options: Based on the strength of your business finances
• Tips for Maximizing Approval Chances:
  • Highlight a strong sales history and financial stability.
  • Provide detailed and organized financial statements.
  • If you the business owner have good credit (above a 640) know there are other low cost & low fee options available)

Pros and Cons for Established Businesses

• Benefits:
  • Ability to leverage a strong sales history for favorable terms.
  • Funds can be used for all types of business needs, such as expansion, inventory, or other growth initiatives.
  • If the business has strong financials and credit they can qualify for more advantageous terms including monthly repayment instead of weekly.
• Financial Considerations:
  • While easier to manage, the cost of MCAs can still be high.
  • It’s important to weigh out the cost of the MCA vs the benefit you will get from what you purchase with the funds.

MCAs for Business Owners with Bad Credit

Eligibility and Requirements

MCAs are an attractive option for business owners with bad credit because approval is based more on sales performance than credit score. Key requirements include a history of credit card transactions and a stable business revenue.

Application Process

• Improving Chances of Approval with Bad Credit:
  • Focus on demonstrating strong and consistent sales.
  • Provide thorough documentation of revenue and business operations.
• Essential Documentation:
  • Business bank statements.
  • Credit card processing statements.
  • Proof of business ownership and identification.

Pros and Cons for Business Owners with Bad Credit

• Accessibility:
  • MCAs provide funding opportunities for those with poor credit who may not qualify for traditional loans.
  • Fast access to funds
  • The flexible repayment structure can ease the burden during low-revenue periods.
• Higher Costs and Fees:
  • Interest rates and fees are typically higher for businesses with bad credit.
  • Managing repayments is crucial to avoid additional financial stress.

Accounts Receivable Financing (Factoring)

Understanding Factoring

Accounts Receivable Financing, or Factoring, involves selling unpaid invoices to a factoring company at a discount in exchange for immediate cash. This type of financing is also called invoice financing. This provides businesses with quick access to funds tied up in accounts receivable, improving cash flow without taking on debt.  Depending on the industry you are in and the types of customers you have, some factoring companies will extend a business line of credit.

Factoring can be considered a same day business loan because after your initial setup, each time you need additional funding, you submit your A/R to your factoring company they can get you funds the same day.

Benefits and Drawbacks

• Benefits:
  • Immediate Cash Flow: Businesses can access funds quickly, often within a few hours after setup.
  • No Debt Incurred: Factoring is not a loan, so it does not add to the business’s debt load.
  • Flexibility: Businesses can choose which invoices to factor, providing flexibility in managing cash flow.
• Drawbacks:
  • Costs and Fees: Factoring can be expensive, with fees based on the invoice value.
  • Customer Relationships: The factoring company may interact with customers, potentially impacting relationships.

Factoring for Start-up Businesses

Eligibility and Requirements

Start-up businesses need to demonstrate they have accounts receivable from creditworthy customers. Factoring companies will assess the creditworthiness of the business’s customers rather than the business itself.

Application Process

• Steps to Apply:
  1. Choose a factoring company and submit an application.
  2. Provide necessary documentation, including accounts receivable aging reports, invoices, and customer information.
  3. Factoring company evaluates the creditworthiness of the business’s customers.
  4. Upon approval, sign the agreement and submit invoices to be factored.
  5. Receive funds, typically within a few hours after initial setup.
• Tips for a Successful Application:

• • Maintain organized and accurate invoicing and accounts receivable records.
  • Ensure customers have good creditworthiness.

Pros and Cons for Start-ups

• Advantages:
  • Immediate access to working capital to support operations and growth.
  • No need for collateral or good credit.
  • You can be a day 1 startup business and still get approved for financing
• Challenges:
  • Initial setup can take a few days due to the credit assessment of customers.
  • Ongoing costs and fees can add up.

Factoring for Established Businesses

Eligibility and Requirements

Established businesses benefit from factoring due to their consistent invoicing and established customer base. Requirements include a steady stream of accounts receivable and customers with good credit.

Application Process

• Streamlined Application for Established Businesses:
  • Established businesses can typically complete the application process more quickly.
  • Steps include submitting accounts receivable reports, invoices, and customer information for evaluation.
• Tips for Maximizing Approval Chances:
  • Highlight strong customer relationships and consistent invoicing.
  • Provide detailed and organized financial documentation.

Pros and Cons for Established Businesses

• Benefits:
  • Improved cash flow to support growth and operations.
  • Flexibility in managing receivables and choosing which invoices to factor.
• Financial Considerations:
  • Costs can be managed with careful selection of invoices to factor.
  • Maintaining good customer relationships is crucial.

Factoring for Business Owners with Bad Credit

Eligibility and Requirements

Factoring is a viable option for business owners with bad credit since approval is based on the creditworthiness of customers, not the business owner. Key requirements include having accounts receivable from creditworthy customers.

Application Process

• Improving Chances of Approval with Bad Credit:
  • Focus on maintaining accurate and detailed accounts receivable records.
  • Ensure customers have good creditworthiness.
• Essential Documentation:
  • Accounts receivable aging reports.
  • Invoices.
  • Customer information and creditworthiness.

Pros and Cons for Business Owners with Bad Credit

• Accessibility:
  • Factoring provides funding opportunities for those with poor credit who may not qualify for traditional loans.
  • Immediate access to cash flow can alleviate financial pressures.
• Higher Costs and Fees:
  • Factoring can be expensive, particularly for businesses with customers that are not highly creditworthy.
  • Ongoing management of receivables is necessary to maintain a good relationship with the factoring company and customers.

Alternative Business Loans

When your business needs quick access to funds, same day business loans might seem like the best option. These loans provide fast capital, often within hours, but they come with higher interest rates and fees. However, if you’re looking for alternatives that might offer better terms or different benefits, there are several other financing options to consider. Here are a few alternatives to same day business loans that can help meet your financial needs without the rush.

1. Business Line of Credit

A business line of credit is one of the most flexible financing options available. Unlike a traditional loan, a line of credit allows you to borrow only the amount you need, when you need it, up to a pre-approved limit. You only pay interest on the amount you draw, and once you repay the drawn amount, the credit line is available again.

This option provides ongoing access to funds, making it ideal for managing cash flow, handling unexpected expenses, or taking advantage of new business opportunities. While it might not provide same-day access to funds, once established, a business line of credit offers quick access to capital whenever you need it.

2. Short-Term Business Loans

Short-term business loans are designed to provide quick funding for businesses that need cash fast but don’t want to commit to long-term debt. These loans typically have a repayment period of three to 18 months and can be funded within a few days.

While not as fast as same day loans, short-term business loans usually come with lower interest rates and fees, making them a more cost-effective option for businesses that need quick capital. They can be used for a variety of purposes, including inventory purchases, working capital, or covering unexpected expenses.

3. Credit Cards

For very small funding needs, business credit cards can be a convenient alternative. Many business credit cards offer 0% APR introductory periods, allowing you to borrow money without paying interest for a limited time. This can be particularly useful for covering short-term expenses or managing cash flow during a tight period.

Credit cards offer flexibility and ease of use, but they also come with higher interest rates if not paid off during the introductory period. They are best used for smaller amounts that you can pay off quickly to avoid accruing significant interest charges.

FAQs About Same Day Business Loans

What are same day business loans?

Same day business loans are a type of financing that allows businesses to receive funds within the same day of applying. These loans are designed for businesses that need quick access to capital for urgent expenses or opportunities.

How do same day business loans work?

Same day business loans typically involve a streamlined application process with minimal paperwork. After approval, the funds are deposited into your business bank account within hours, allowing you to access the money immediately.

What types of businesses qualify for these types of business loans?

Most small and medium-sized businesses can qualify for same day business loans, especially those with a stable cash flow and a history of consistent revenue. However, specific eligibility criteria may vary depending on the lender.

What is the interest rate for same day business loans?

Interest rates for same day business loans can vary widely depending on the lender, the amount borrowed, and your business’s financial profile. Generally, these loans may have higher interest rates due to the expedited approval process.

How much can I borrow with a same day business loan?

The amount you can borrow depends on the lender and your business’s financial health. Typically, lenders offer loans ranging from a few thousand to several hundred thousand dollars.

How fast can I receive my funds?

After approval, funds from are usually deposited into your account within a few hours. Some lenders may offer funding within minutes, depending on their process and your banking institution.

Do I need a good credit score to qualify for a same day business loan?

While a good credit score can improve your chances of approval and better terms, some lenders will offer these loans to businesses with less-than-perfect credit. However, lower credit scores may result in higher interest rates.

What documentation is required for a same day business loan?

The documentation required is typically minimal. Lenders may ask for basic information such as identification, proof of business ownership, recent bank statements, and an application.

Can I get a same day business loan if my business is new?

Some lenders offer these loans to new businesses, but it may be more challenging to qualify. Lenders often look for a few months of business operation and a steady revenue stream. Startups may need to explore other financing options if they have been in business less than 6 months.

What are the repayment terms for same day business loans?

Repayment terms for can vary. Some loans may need to be repaid in a few weeks or months, while others may offer longer terms. It’s essential to understand the repayment schedule before accepting the loan. Also, be aware of how the finance company will be taking their payment.  Some will take their payment daily, weekly or monthly directly from your checking account.

Are same day business loans expensive?

Same day business loans can be more expensive than traditional loans due to the speed and convenience they offer. Higher interest rates and fees are common, so it’s important to weigh the costs against the benefits.

Can I use a same day business loan for any purpose?

Yes, same day business loans can typically be used for a variety of business purposes, including covering payroll, purchasing inventory, managing cash flow, or taking advantage of a time-sensitive opportunity.

What happens if I can’t repay my same day business loan on time?

If you can’t repay your same day business loan on time, you may face penalties such as late fees or increased interest rates. It could also negatively impact your credit score. It’s important to communicate with your lender if you foresee repayment difficulties.

How do I apply for a same day business loan?

You can apply for a same day business loan by filling out an online application with a lender that offers this type of financing. The process is usually quick and easy, with many lenders offering instant or same-day approval decisions.

Are same day loans the same as unsecured loans? 

No, same day loans and unsecured loans are not the same, although they can sometimes overlap.

Unsecured Loans

1. • Definition: Unsecured loans are loans that do not require any collateral. The lender provides the loan based on the borrower’s creditworthiness, rather than a security asset like property or equipment.
   • Security: These loans are inherently riskier for lenders since they rely solely on the borrower’s promise to repay, making credit score and financial history critical factors.
   • Use Cases: Unsecured loans are often used for personal loans, credit cards, and some types of business loans where the borrower may not have or does not want to use collateral.

Key Differences

1. • Speed: Same day loans are focused on how quickly you can get the money, while unsecured loans are focused on the type of security (or lack thereof) backing the loan.
   • Collateral: Same day loans can be secured (backed by collateral) or unsecured. Unsecured loans, by definition, do not involve collateral.
   • Credit Score:  Most unsecured business loans require good personal credit.  Usually, a minimum credit score of 720.