Business cash advance overview
A business cash advance comes in handy when you don't qualify - or have time- for a lengthy loan process. By submitting a quick, one-page application and providing basic documentation, you could be approved within 24 to 48 hours and have the cash in hand within 7 to 10 days.
Business cash advances can be used for almost any business expense:
- Purchase new equipment or inventory
- Pay a tax bill or other debt
- Invest in new marketing activities or advertising
- Expand facilities or open new store locations
- Take advantage of short-term purchasing opportunities (liquidations, sales)
Be prepared to explain how you plan to use the funds from your business cash advance. Some providers will only allow you to use the money to grow your business. These providers need to know you're actively working on paying off the advance by increasing sales. Others may be more flexible, provided you maintain a steady flow of credit card transactions.
Part of the lure of a business cash advance is its simplicity. Unlike business loans or equipment leasing, which almost always requires collateral or a personal guarantee, the business cash advance process is far less restrictive. To qualify, you only need to prove your business has:
- Operated for at least one year
- Processed credit cards for a minimum of six months
- No prior bankruptcies or property liens
- One or more years left on a property lease
- No existing business cash advance agreement with another company
While you don't need a strong credit rating to get a business cash advance, it certainly helps. Providers can offer better rates and larger advances if you show a solid financial history.
A business cash advance isn't for everyone. You may not want to pay such high rates or give control of your incoming credit card revenue to a provider. Instead, here are other funding sources to consider:
- A business loan requires collateral and extensive documentation, but can provide more money, better rates, and flexible payment options over a long period of time.
- If you need new or better equipment, an equipment lease lets you spread payments over time without a large, up-front investment.
- Factoring is a similar service to a business cash advance - you sell your accounts receivable to a provider at a discounted rate for up-front cash.
One approach to avoid is borrowing against the credit limit on your personal or business credit cards. You'll pay high fees for credit card cash advances, and they could have a negative impact on your credit history. Unless you have a very short-term need for cash, credit card cash advances are an inefficient choice.