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Business Cash Advances: What You Need to Know

You need money for your business, and you need it now. You’re looking through your options, and you aren’t sure where to turn. Maybe a business cash advance is what you need to get your head above water. Before you commit to a business cash advance, do your homework. The more you know about this type of funding, the more informed your decision will be. Then, you can move forward with confidence, whether you decide to get a business cash advance or another type of loan.

They’re Fast

A lot of times, you don’t realize how badly you need money until you’re in dire straits. When that happens, you need the money quickly. A bank loan can take up to 30 days to go through, which is longer than most people have to wait. On the other hand, a business cash advance is a fast process. The money usually is available in a couple of days so you don’t have to wait too long before you have access to the funds.

You Don’t Need Much Information

If you’ve ever applied for a bank loan, you know how much paperwork is involved. It can feel as if you’re signing away your life as you move through the application. They want to know everything about you, from how many kids you have to where your parents live. This is a time-consuming and nerve-wracking experience.

The same isn’t true for merchant cash advances. The applications take minutes to move through. You will have to give some basic information and connect the lender to your bank account or credit card processor. Then, the lender can analyze your credit card payments and determine if you’re eligible for a cash advance. This is so much easier than applying for a bank loan. Instead of spending the better part of a day on the application, you’ll spend about two minutes on the process. It’s so quick and easy that you can do it on your phone while you’re waiting in line.

Good Credit Isn’t Required

In a perfect world, your credit would be as perfect as you are, but that might not be the case. If you have bad credit, you probably think you can’t get any funding for your company, but that isn’t true. Good credit isn’t a requirement for a business cash advance. These cash advances are based on the health of your business, so as long as you’re bringing money in, you can get an advance. Then, the lender will take a percentage of your credit card sales as repayment.

You Need to Have an Established Business

While good credit isn’t necessary, you do need to have an established business to get a business cash advance. Most lenders require that companies have been in business for at least a year in order to receive funds. That way, they don’t have to worry about you closing your doors right after you take the money.

Interest Rates Vary Greatly

Regular business loans are regulated, so the interest rates are capped. That isn’t the case for business cash advances, though. These advances aren’t categorized as loans, so they don’t have the same guidelines that you’ll get with traditional loans. Because of that, the interest rates that lenders charge vary greatly. Some lenders charge outrageous interest rates, so you need to do your research before you apply for a loan. Watch out, or you could end up paying back a loan that has 200 percent interest. You will barely knock down your principle with this type of payment.

They’re Meant to Be Short-Term Loans

If you get a business cash advance, you need to look at it as short-term funding. In other words, this is something to use to get out of a short-term financial problem. It can keep you afloat for a few months, but advances are meant to be paid back quickly. Don’t expect to make payments for years. If you need to have funding for years to come, consider another type of loan.

The Amount Available Varies

The amount of money you can get from a business cash advance depends on how much money you bring in with credit card sales. The lender will look at your credit card sales and then come up with an amount based on those. Then, the merchant will take a percentage of those sales as repayment every month until the loan is completely satisfied.

If you don’t make anything in credit card sales, you won’t qualify for a merchant cash advance. You can choose a different type of loan, though. There are a lot of options out there for small business owners who need money.

You Can Use the Funds for Anything

When you get a loan from a bank, you typically have to explain exactly how you are going to use the funds. For instance, you might take out a loan to build a new addition to your business. The bank will expect you to build that addition, and someone might even come out and check out it. If you don’t follow through with the addition, the bank can ask for its money back immediately.

Business cash advances give business owners the freedom to do what they want. You can use the advance for anything related to your business, from advertising to buying new equipment, or anything in between. You don’t have to show proof of how you use the funds, so you can split it up to your liking without worrying about documenting it. This makes it easier to get the most out of the funds.

They Can Be Taken Out on Top of a Loan

Since business cash advances aren’t loans, a lot of companies provide them to that already have loans out. However, it’s important that you make sure you can meet all of your repayment obligations before taking on a cash advance. While some people can do this easily, others have problems once they take on an advance. Go over your finances, and only get an advance if you can make your payments without any problems.

The Lender Works with Your Payment Processor

When you get a business cash advance, the lender receives payments directly from your payment processor. You need to make sure your payment processor has a business loan option. Otherwise, you will have to switch processors in order to receive a merchant cash advance. This is typically an easy process, so it shouldn’t hold you back from getting an advance.

You Might Have to Repay the Loan if Your Business Fails – Or You Might Not

Some lenders require repayment if the business fails, while others do not. Talk with the lender to find out what happens to your merchant cash advance if your business fails. This will give you a better idea of what to expect when you move forward.

Merchant cash advances are a good option for people who need short-term funding. They are relatively easy to get, even if you have bad credit, and you can use the funds for anything related to your business. Most importantly, you can get the money quickly so you won’t have to worry about running your business without money.

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