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Buying Guide for Business Cash Advance
Introduction
If you have been looking for a business loan through traditional financial institutions, then you may be disappointed for quite some time. Big banks are meant to serve big business, and if you have a small or medium sized business that you are trying to get off of the ground, you may have a more difficult time of things.
In order to even be considered for a traditional loan package, you will have to spend time filling out long paperwork. You will have to submit to a quite thorough background check and credit check. You will need to have the collateral that the bank considers valid. Even if you have all of this, you may still be turned down.
Small and medium-sized businesses are much more flexible than the larger businesses that the traditional financial industry serves. Your business may be able to get off the ground with a merchant cash advance, also known as a business cash advance. There are some definite advantages to this kind of loan package for your business.
First of all, you will not go into debt. A business cash advance means that you sell a percentage of the transactions that you will have in the future to a financial provider. You can keep your cash flow going and pay back your loan at the same time with this kind of a package.
Secondly, you will also have much less to go through in terms of a background in a credit check. Because you are not actually going into debt with the financial provider, they do not need to know your FICO credit score or any of the other hallmarks that the traditional financial industry relies on.
You will also be able to do business with much less restriction than with the standard business loan. Lastly, you will get your money much more quickly.
The Basics
Basically, if everything goes well, you can have the money that you need for your business in as little as 24 hours. However, in most cases, the approval process takes anywhere from one to two days and the cash that you need comes within seven to 10 days.
Because there are no restrictions on a business cash advance, you can use the money for just about any business expense. This may include paying off a tax bill, investing in new marketing or advertising, expanding your store locations, making a purchase of new inventory or equipment or taking advantage of a short-term hardware sale that you would not be able to participate in later on.
Although there are fewer restrictions on a business cash advance, you should still be ready to explain how you will spend the money that you will receive. Your financial provider will also need to know how your new expenditures will affect sales, as those sales are what solidify the payback structure for the financial partner.
Getting a business cash advance is much less stringent to qualify for. In most cases, all that you have to do is prove that your business has been in operation for one year and processed credit for at least half of that year. You should not have any bankruptcies or property liens, and most companies will not do business with you if you have a business cash advance agreement with a competitor.
Choosing a Provider
You should look for certain characteristics within a financial partner if you are looking for business cash advance. First and foremost, the customer service that company provides should be absolutely pristine. Because your association will be a relatively long-term one, you need to make sure that you are doing business with a company that you can rely on.
Business has its ups and downs. You need to do business with a financial partner that understands this. Although you may create an agreement for business cash advance with all good faith, there may be some aspects of your business that simply cannot control in the future. If there is an unexpected business slump for your expenses go up for some reason, you should have a provider who understands this and is willing to work with you throughout the process.
Your financial provider should be able to help you feel comfortable during the many transactions that will take place. In order to do business with some financial providers of business cash advances, you may have to switch merchant account providers. You may also have to work with a smaller flow of cash over the repayment period, and you need a provider who can explain to you how this will actually help your company in the long run. If they cannot convince you of it, then why would you do business with them in the first place?
Pricing
You should also be sure that you have the appropriate pricing for the services that you are receiving. Although some business cash advance rates can move as high as 45 percent, they will definitely be affected by the amount of business that you have done in the past, the credit history of your customers and many other factors.
There are three main criteria that will determine how much you will pay in exchange for the privilege of a business cash advance. The factor rate, the daily retrieval rate and the advance amount are terms that you should familiarize yourself with before you do business in this arena.
Establishing a Merchant Account
You will need to have a merchant account that coincides with the agreement that you will be making with your business cash advance provider. You will need to bring in anywhere from three to six months of recent credit card statements so that the merchant can see trends within your revenue.
From this information, the merchant will help you to calculate your safe retrieval percentage, a term that coincides with the amount of money that can be taken from your digital revenue by your business cash advance provider without negatively affecting your business over the long-term.