Merchant Cash Advances Surpass Leasing As Goto Financing Option for Small Businesses

Financing products sought (of those that applied for any kind of financing in 2018)

More small business applied for merchant cash advances in 2018 than they did leasing, factoring, or equity investments. That’s according to a recent Federal Reserve study of small businesses with less than 500 employees.

Nine percent of applicants applied for merchant cash advances in 2018 while only 3% applied for factoring. Leasing dropped year-over-year from 10% in 2017 to 8% in 2018.

On average, merchant cash advances were approved 85% of the time compared to business lines of credit (73%), business loans (67%), and SBA loans (52%). Six percent of all small businesses surveyed said they used merchant cash advances on a regular basis, versus 9% for leasing and 3% for factoring.

Unsurprisingly, small businesses overwhelmingly still sought loans or lines of credit. Of those surveyed that applied for any type of financing in 2018, 85% applied for a loan or line of credit and 28% applied for a credit card.

You can download the Federal Reserve’s complete report here.