Those looking for small business funding automatically find themselves turning to traditional bank loans. However, businesses who have applied for a loan before knowing what a stressful and troubling ordeal it can be, often ending in rejection. In the current state of the economy, it is even more difficult to be approved for a loan. So what are businesses to do? A business cash advance is one alternative that many are turning to, and for a good reason.
Cash advances offer numerous benefits over a loan. Most of these benefits apply to small businesses and who better to target than the backbone of this country? The main difference between the two financial options has to do with the very nature of each and how they operate. A merchant cash advance is not a loan. Instead, it is a purchase of future receivables. What does that mean? The lender will take a small percentage of your future credit card sales until the amount is repaid. The rate must be agreed upon first, of course. But this also means your payments each month will fluctuate depending on how much you make -another added benefit. Having a large looming bill over your head every month can be quite scary. The fear of not being able to pay the bill is unpleasant, to say the least. Those in the small business world know that income changes from month to month, season to season. With no fixed monthly payment, the bill can ebb and flow–just like your income.
What about approval ratings? Approval ratings for business cash advances are much higher than that of a loan. Often one’s credit score will not have an effect either. Instead, the lender will look at debit and credit card receivables to see if you qualify. And with no collateral, you do not have to worry about putting up your assets, like your home, on the line. These features lead to an increased chance of approval.
With some loans, companies are often limited to what they can use the money for. If they needed the loan for expansion, they cannot give the office a new paint job and upgrade the computers too. But there are no restrictions on a cash advance. Companies can feel free to use the money however they wish -whether they want new furniture or to purchase better equipment.
Sometimes a cash advance is the only option for small business funding, but that does not mean it is the lesser choice. With added benefits and a greater chance for approval, many small businesses are turning solely to the cash advance.