Business Cash Advances

Business Cash Advances Explained

Cash flow is the lifeblood of any business. So many successful businesses fold because of a lack of cash and if your business needs it, it usually needs is fast. Since very few of us have $50,000 cash stashed under our beds, we have to rely on banks for loans. Borrowing money is a great way to fund any business and its a financing option that's worked for years now. There are certain obvious problems with traditional cash loans - which is why a business cash advance is such a great option.

Usually when a business needs cash, they need it fast. With a traditional loan it can take months to actually get approved and get the money. the process is slow and cumbersome and banks go out of their way to make sure they don't risk their money. Endless paperwork, credit checks and delving into every minute detail of your business is what makes business loans a real pain in the butt. Even if your business is incredibly successful, you can have a tough time getting a loan from your bank.

Business cash advances is very different. Unlike traditional loans, it can give you access to cash in as little as 48 hours and all the usual hassles of applications and paperwork is virtually eliminated. The process is fast, streamlined and designed to be hassle free.

A cash advance for your business is not a loan. It basically relies on your credit card processing history and in theory you "sell" your future credit card transaction in advance. Because of this you will also not have a monthly repayment but instead, the advance will automatically be deducted from your credit card purchases and it's typically 15-20% depending on the amount of your advance.

Although this is a new concept, its already proven itself to be a very effectively to get cash quickly. Its a low risk to the lender, a relatively cheap way to get money for the business and best of all, its incredibly fast and can get you the money you need to grow your business.

Requirements For a Business Cash Advance

One of the reasons why a standard business loan is such a slow and cumbersome process is because lenders actually take a huge risk in lending you money.. With an average of 9 in 10 businesses that fail in the first 18 months, they need to ensure that their investment will be safe with you. Hence, all the credit checks and delving into every small detail of your life and your business.

Even for established businesses there is a very strict criteria for getting a loan to grow your business or to see you through any cash flow problems you may have. Cash flow is often the biggest problem in any business and getting the necessary cash to see you through is a serious issue. With a cash advance its pretty easy, but you need to meet certain strict criteria. If you meet it, you can have your money in as little as 48 hours.

The first and most important criteria is your credit card processing history. A business cash advance is basically an advance that is based on your business' credit card activity. This takes all the risk away from the lender which is why they readily give the advances to good businesses. As minimum you need to be processing major credit cards like Visa and Mastercard for at least 9 months and you must average a minimum of $5000 worth of transactions a month. Obviously the more you do, the more you can borrow.

The next requirements will be proof of your monthly income in the form of your credit card statements. All you need to do is provide the statements from your credit card processing merchant and typically you need to provide statements for the past 9 months to give an accurate reflection of your business' sales history.

Once you pass this criteria, you will need to evaluate the terms of the cash advance. Remember that its not a cash loan with monthly repayments. Its an agreement with the lender that he gets a percentage of your credit card sales to cover the repayments of the loan. Its usually a percentage of your credit card sales which is fixed for a certain time frame and you need to be very vigilant to make sure that the small print don't catch you out. Make sure that you check the cap of the deductions because you don't want to pay back more than what you are getting.

The Dangers Of Cash Advances

Cash loans and small business loans used to be the only options for businesses to quickly get a cash injection to steer them through rough times. When the global financial crises hit, many businesses faced some serious cash flow problems and while loans used to be a way out, most financial institutions were in dire problems themselves. From here business cash advances developed as a way to help business owners get the cash, while securing the lender against too much risk.

Obviously this is still a form of a loan and although you don't pay it back like a traditional business loan, you are still responsible for the money you get. While many cash loans have very high rates, fees and charges the majority of cash advances are much more reasonable since the risk is significantly lower. There are some dangerous things you need to look out for though.

Firstly, the amount you can get is directly tied to your business' credit card transactions and if you do a decent amount of sales you can get some large advances. Its important to not go overboard with how much you get. Its still a loan and you are still responsible for paying it back in one way or another.

When you make the agreement for the cash advance, you effectively give the lender a portion of your profits for a certain period of time. A percentage of your sales will act as the repayment and in effect, a portion of "your money" will go directly to the lender. You need to make very sure that you know exactly what the terms are and pay particular attention to the percentage that will be taken from your sales. Also pay particular attention to the period for which you will be responsible for these deductions.

Like all loans, the lender takes on responsibility and they need to yield a return on the investment they make in your business. Since this is connected to your credit card sales, they will base the cash advance on these sales. Obviously a crash in sales will affect them and you need to make sure that you are very clear about the penalties involved.

Lastly, you need to read the basic terms with a fine tooth comb. There are always fees and exit fees involved and you need to make sure you know exactly what you let yourself in for.

Cash Flow, Loans and Business Capital

Any business owner will tell you that starting a successful business is one thing. Running a successful business is quite another and in many ways a much bigger challenge. Any business needs to grow and in the current economic climate if you are not growing you will not be around next year. Cash flow is crucial for your business. It really is the lifeblood that keeps your business alive.

A large part of effective financial planning is to manage cash flow. Even the best business managers can get this wrong as its so closely related to business growth. Any business needs to expand and contract - its like breathing and if your business is not breathing its probably suffocating. The breathing process involves pumping money into your business for growth while seeing the profits come out when your business "exhales".

There is an old and often cliched saying in business that you have to spend money to make money and this is very rue. Investing money into your business is the only way to grow, but finding the money , and more particularly the cash, is not always that easy. You need cash to operate a business and having enough excess cash to grow your business can be a challenge. This is where business loans come in.

Business loans have become very hard to get simply because so many businesses fail. Its a long and slow process to get approved, but it can be a very effective way to grow your business. If you have a successful business then getting approved for a loan is much easier since the risk is much lower. Speed is still an issue because growing your business is all about acting fast. Waiting months for a loan to get approved is hardly the best option.

cash loans are slightly better as the approval process is much faster. the problem is that the amount you can borrow is much smaller and the interest is usually very high. Business cash advances are relatively new and its commonly known as factoring. It allows you to get access to money very fast and your credit card sales act as the security for the loan. Its one of the fastest ways to get cash and has very little risks if you are a successful business.