Why Asset Based Lending Beats A Merchant Cash Advance Every Time

February 9, 2017 by CNH Finance, LP in category “Financing”

For many businesses in need of working capital, a merchant cash advance often looks like an attractive option. A merchant cash advance claims to offer flexibility, low costs, and zero debt. But how does a merchant cash advance stack up against asset based lending?


Unlike traditional loans, a merchant cash advance does not have a regular payment schedule. Payments are made automatically when customers pay for purchases with credit cards. While this is great in theory, a business going through a light sales period may not be able to repay the merchant cash advance before the terms of the agreement end, which can trigger a number of heavy penalties. Asset based lending, by contrast, works like a regular business line of credit. Business owners only owe on what they use, rather than being forced to take a large lump sum.

The Low Costs Offered By A Merchant Cash Advance

A merchant cash advance is usually advertised by offering no credit checks, and with overall costs which are lower than bank loans. It is true that there are no credit checks, but business owners need to look at the interest rates attached to most merchant cash advances. The longer it takes to repay the advance, the more the balance increases. Additionally, a business must look at the cost of processing credit card transactions. If a business is taking out a merchant cash advance as a remedy for immediate cash flow problems, it may end up in worse financial shape than when it started. On the other hand, asset based lending is structured around concrete things, like the value of receivables, equipment, and other assets owned by a business. Because asset based lending is a line of credit, it is not based on future sales, and the interest rate is no different than other credit lines.

Zero Debt

Merchant cash advances do not place any debt on the balance sheets, which is always nice. However, a merchant cash advance is not inexpensive, in the long run. There is still the matter of having an advance structured around future sales, when those sales are unpredictable. Additionally, once the capital provided by a merchant cash advance is used, it is gone forever. Asset based lending provides a lines of credit which can be accessed as needed, and the amount of credit available actually grows with your business.

Contact CNH Finance to learn more about asset based lending solutions, and how they help small businesses.

Image for 'Receivables: Beyond Simply Generating Revenue'
Receivables: Beyond Simply Generating Revenue

To many business owners, receivables are the most important part of any operation. After all, receivables represent all of the work and effort put into customer’s request. They are are…

Image for 'Greenwich, CT ABL Solutions: Working Capital Without Debt'
Greenwich, CT ABL Solutions: Working Capital Without Debt

The business landscape in Greenwich, CT has been going through a change over the past year. Instead of taking out loans, or using cost prohibitive alternative financing solutions such as…

Image for 'Medical Supplies: Rethinking The Purchasing Model'
Medical Supplies: Rethinking The Purchasing Model

From small family practices to large healthcare centers, purchasing medical supplies is a constant routine. Medical supplies also make up a considerable portion of any budget for…

Image for 'Budget Friendly Financing for Your Business'
Budget Friendly Financing for Your Business

For businesses trying to adhere to a budget, taking out large loans and cash advances can flip finances upside down. This can be especially true for new and small businesses, as well as…

CNH Finance
24 East Ave #1285
New Canaan, CT 06840
Phone: (203) 266-3210

Business Development
Long Beach, CA 90803
Phone: (562) 833-7815

Business Development
3334 E. Coast Hwy, Suite 541
Newport Beach, CA 92625
Phone: (714) 520-1788

Melinda Ficek

Maryland Office
3 Bethesda Metro Center, Suite 723
Bethesda, MD 20814
Phone: (301) 529-9993

Steve Silver

Business Development
5050 Quorum Drive, Suite 700
Dallas, TX 75254
Phone: (972) 687-9157

Rossi Felix