Expansion Capital Group's (ECG) merchant cash advance (MCA) financing should only be considered if you can't qualify for financing from elsewhere. The primary reason being that MCAs tend to be more expensive than more traditional forms of financing like a term loan, a business line of credit or a working capital loan. MCAs also tend to be tough to estimate their real cost since they're priced using factor rates rather than APRs, which is how most other forms of financing are priced.
Expansion Capital: Worth Applying?
As stated earlier, Expansion Capital should only be considered if you cannot qualify for more traditional forms of financing. Small-business financing is tough to qualify for, as many lenders look for high credit scores, high revenue and other stricter requirements. MCAs are meant to serve borrowers who don't have such strong qualifications.
Ideally, we'd recommend that borrowers look for more traditional forms of financing like a term loan or business line of credit from either a bank or online lender. However, we also recognize that many borrowers can't meet some of the stricter requirements set by other lenders. If you're certain that, despite the higher cost of financing, your business will still experience a net growth, we'd still recommend it.
Low Credit Score Requirements: Obtaining business financing without a strong personal credit score is very difficult. There are many lenders who won't even consider borrowers with less than excellent credit. However, lenders like Expansion Capital have made financing accessible to a previously unaddressed market, and we always recommend financing when you're due to experience a net positive.
Fast Funding: Sometimes the speed with which you receive your funding is just as important as how large the loan is and how low the rates are. Expansion Capital follows other online lenders in offering financing within a very short timeline. Compared to the weeks or months that banks can take to process and fund applications, Expansion Capital is one of the fastest options available.
Expansion Capital Downsides
Expansion Capital's lack of transparency is its biggest weakness. Lenders are notorious in the small-business financing space for their lack of transparency, and Expansion Capital is no exception. By not featuring its rates online, it makes it tough for prospective borrowers to gauge whether or not they should apply.
Expansion Capital also reportedly performs hard credit pulls when assessing applications. This puts borrowers in a tough spot, as they won't know their rates without applying, but they won't be able to apply without it affecting their credit score. If possible, we recommend asking for rate estimates before applying.
High Rates: MCAs are typically priced to be more expensive than more traditional forms of financing, and Expansion Capital's financing is no exception. With an estimated 1.2x - 1.6x factor rate, borrowers will be paying $1.20 - $1.60 per every dollar borrowed.
Lack of Variety: Expansion Capital only offers MCA financing, which is limiting compared to other lenders who often offer multiple products. It's a downside because different forms of financing cater to different needs. MCAs are most appropriate for businesses with high card transactions and aren't necessarily the best financing for those looking to finance larger projects like real estate transactions or marketing campaigns.
How Does BFS Capital Compare to Other Online Lenders?
While Expansion Capital offers large term loans with lenient requirements, we'd still recommend borrowers shop around to weigh different options.
ECG vs. BFS Capital
BFS Capital offers MCA financing but it also offers a short-term loan as well. BFS offers MCA financing at slightly lower factor rates, and its financing can be as large as $5,000 - $500,000, which is almost twice as large as the MCAs offered by ECG. For those in need of larger financing, we'd recommend BFS Capital. For those with lower credit scores, we'd recommend ECG, as its requirements are slightly more lenient.
ECG vs. CAN Capital
Both CAN Capital and ECG offer MCAs but the MCAs offered by CAN Capital are slightly smaller. If this isn't an issue for your business, we'd recommend obtaining financing from CAN Capital instead because of its lower factor rates. CAN Capital also offers short-term business loans, which are better suited for more use cases than MCAs.
ECG vs. Credibly
There isn't much to distinguish ECG's and Credibly's MCA offerings other than the slightly larger financing offered by ECG and the slightly cheaper rates offered by Credibly. In this case, we'd recommend applying for both products if your personal credit score can handle the hard credit check by ECG. Credibly will perform a soft pull to pre-qualify borrowers but will perform a hard pull as the application process progresses.