How to Get a Business Cash Advance
In today’s lending climate, finding traditional business loans with bad credit or no credit and little or no collateral is next to impossible. The good news is because of this tight credit market some alternative financing sources have spawned new opportunities for business owners to get access to the funding they need.
Now some of these programs have been around for quite some time. According to a USA Today article, 65% of commercial loans issued to small businesses were considered “unconventional” — including factoring, business cash advances and revenue based lending – up from about 25% two years ago.
In this particular post we’re going to address the business cash advance also known as a merchant cash advance. This specific program is becoming more popular and mainstream because it’s fast, requires minimal paperwork, and doesn’t require pristine credit ratings or collateral that many other programs do.
In a nutshell, a business cash advance provider purchases a specific amount of your company’s future credit card sales in one lump sum in exchange for the receivables you get which are paid to the provider over time, usually in the form of a daily percentage of your daily credit/debit card totals.
By leveraging your future card sales for upfront capital your business can get the extra cash it needs for expansion, new equipment or to cover unexpected expenses. Unlike a traditional bank loan that has fixed payments, business cash advance payments are linked to your company’s credit card sales—when credit card sales are low, so are the repayments and when sales are high, the advance is paid back at a faster rate.
Repayment terms are discussed during the application process and will depend on the specific payback period you select. Typically the terms can range anywhere from 5 months to 13 months.
Once a cash advance is paid back, the process is very easy for your company to get another business cash advance. Typically, you’re business is already preapproved for another cash advance but any outstanding advance needs to be about 60% repaid before another advance is opened.
So who qualifies?
If you don’t qualify for financing at a traditional bank, a business cash advance (advances range from $5,000 to $1,000,000) may be an option if you receive a large portion of your revenues through credit card payments (for example, restaurants and retail stores). To qualify, it requires a history of processing credit cards at your business for at least 60 days and at least $5,000 a month in credit card sales.
Although there are many types of business cash advance providers in the marketplace one particular provider that I highly recommend enables you to get a business cash advance that will also build your business credit. (see form below)
It’s the only credit card processing company in the industry that I am aware of that positively reports your processing fees as on time payments to the major business credit reporting agencies. So not only do you have the opportunity to get the cash you need with an advance, you also can build your business credit simultaneously.
Now before you request any advance from any provider you should consider what amount you need; you are promising a portion of your future profits for the cash you receive upfront. Also, evaluate the repayment plan and read the paperwork thoroughly. You should know exactly what you’re signing up for before penning a final signature.
Every now and then every business needs a financial boost whether it’s to help cover operating costs during a slow season, purchase new equipment, start a renovation, or even build up inventory for an upcoming busy season, a business cash advance may be just what is needed.
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About the author
Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. He is a business credit blogger for Dun and Bradstreet Credibility Corp, the SBA.gov Community, About.com and All Business.com. His articles and blog; Business Credit Blogger.com, have been featured in ‘Fox Small Business’,’American Express Small Business’, ‘Business Week’, ‘The Washington Post’, ‘The New York Times’, ‘The San Francisco Tribune’,‘Alltop’, and ‘Entrepreneur Connect’.