Why a Merchant Cash Advance is Better Than Crowdfunding

With the constant emergence of new funding models, it can be challenging to determine which option is best for your small business. Crowdfunding is one such model, where you pitch your business idea to an online community in hopes of securing investment from multiple contributors. In contrast, a merchant cash advance provides a single guaranteed sum of money from one lender, allowing you to use the funds as needed. Here’s why a cash advance is often a better option than crowdfunding.

Crowdfunding Takes Time

The crowdfunding process typically involves pitching, launching, advertising, tagging, posting, and repeating, followed by a wait for potential investors to contribute. This cycle can take weeks or even months to reach your target amount. By contrast, with a merchant cash advance, funds can be in your account within 48 hours of application, providing much-needed speed and convenience.

Crowdfunding is Not Free

Crowdfunding platforms usually require you to offer compensation, such as a stake in your business or future profits. This means giving up control or being indebted to your investors. On top of that, crowdfunding platforms charge fees, often a percentage of the funds raised, which can be higher than the cost of a cash advance. While a merchant cash advance may come with higher costs, you’re paying for speed, transparency, and not having to put up collateral or share control of your business.

Crowdfunding Requires Major Effort

Successfully raising funds through crowdfunding requires continuous promotion until you reach your goal. This is a time-consuming process, potentially taking focus away from running and growing your business. Start-ups with no business history may have no other choice, but if you're a retail business with over six months of trading, better options like a merchant cash advance are available.

Additionally, the crowded nature of crowdfunding means that standing out from the competition requires significant effort in advertising, networking, and marketing, all of which can be costly. A merchant cash advance, on the other hand, does not require you to spend money to raise funds.

Risk of Exposing Your Idea

To attract investors, you’ll need to fully disclose your idea, potentially exposing it to competitors who may have the resources to act on it before you do. With a cash advance, you don’t face this risk, as there is no need to share your business concept with the public.

Crowdfunding Success is Rare

The reality is that only about 10% of crowdfunding campaigns achieve real success, compared to over 70% of cash advance applications that are approved. Many merchant cash advance lenders approve applications even from industries that traditional lenders or crowdfunding platforms tend to avoid.

The Bottom Line

While crowdfunding might be trendy, it’s not always the best option for funding your business. For a more predictable, practical, and quick way to secure a cash injection for your retail business, a merchant cash advance is often the smarter choice. It’s popular for a reason.

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