A business cash advance is one of the easiest ways of bringing in cash for your company even if you have no collateral or bad credit history.
How does the cash advance work?
The logic behind it is simple; you are selling your future sales and getting money for it. The paying back process depends on the progress your company shows. If your business is successful, you will pay back faster, but if you are facing any issues, then the payment frequency is decreased as well to make sure you feel no extra burden. Eventually, you pay the whole amount borrowed plus a fixed fee that is decided in the initial contract.
Keeping your cash flow consistent is one of the bases of a booming business, and it is not just affected by the products you are selling but also by the materials you buy. Therefore, in this article, we look at three different ways your company can benefit from a business cash advance.
You receive the cash instantly.
Another benefit that your business can gain if you apply for a business cash advance is that you will get the money without having to wait for a long time. There are many different situations where you might need instant money. For example, if you need to buy new equipment and the price is reduced if you buy the product in bulk on sale, saving you money in the long run, but you don’t have that amount of cash at the time. To take advantage in that scenario, you need some kind of quick revenue, and a cash advance can be a great solution.
With traditional loans, there are many processes a person has to go through before being granted the money. You must provide documentation to the lender so that they can evaluate your credit score. You may have to provide your business history, find collateral for payments, and come to an agreement on different terms and interest rates, which can take weeks if not months sometimes, by which time it might be too late for you.
With a business cash advance, you are likely to be waiting no more than a week or so and will get the cash directly into your account. The only process you have to follow is to ensure you fill out the application form which is very basic. If as a company you don’t have a good credit score, you can still qualify for the funding. All you need to do is to fill out the online form with your details and wait for approval.
Use the money the way you want, where you want.
Mostly when you go for a business loan, the lending authorities apply certain restrictions on the way you can utilise the money. Not just that, but in many cases there are restrictions set too on when you will receive different instalments of the money. Usually, you get a fixed percentage in the beginning, with the next set of funds only being made available if you have completed a specific task, in a certain way in a fixed time.
Sometimes, it can get challenging to manage these deadlines because of factors that are not under your control, or you may need to invest cash in something that needs immediate care. Therefore, loans can be problematic in these circumstances. That’s where the benefit of a cash advance comes in; you can use it the way you want.
There won’t be any clauses that will stop you from buying more inventory, or directing the cash into something else that requires attention. That’s one of the main reasons cash advances have become popular because you are not bound as a business in how you spend the cash. As the business owner, you are entrusted to make the right decisions. Afterall, you know your business best and it is in your best interests that it succeeds.
Payback whenever you want and the way you want.
The most significant advantage of a business cash advance is that a cash advance is not a loan, so you don’t have to pay set repayment amounts every few weeks to make sure you have a certain percentage off your books every new calendar month.
With cash advances, repayments are usually made through credit cards because it’s the easiest way for a merchant to keep track of your sales and take instant payments back.That’s because, with business cash advances, you are not actually borrowing money from the lender but actually making them a partner in your future sales. They take a fixed amount based on your credit card sales, and you pay them back depending on the receipts of your card. Which means, if for a month you have fewer sales, you don’t repay as much as a good month; just a fixed percent on those sales. If the product sells more the next month, the payment for your advance automatically increases that month, and so on.
Ultimately, it will cost you less than the amount of interest you would have had to pay in the case of a loan. So not only are you free to spend the money the way you want but you can also pay gradually in line with the sales of your company, without worrying about fixed repayments coming out of your account, whether you can afford them or not.
If you are a new business, this therefore helps enormously because you can be sure that your cash flow will not suffer as you repay the cash advance.
In addition, you also aren’t needing to keep anything as collateral which takes away some of the risk of a traditional business loan.
In summary, a business cash advance is favourable over a loan for many reasons, but clearly, there are horses for courses and there are some scenarios where a business cash advance might not be your best option. As with all things, it’s a good idea to do your research, weigh up all the possible options available to you, and consult expert advice if needs be.