A Cash Advance is an advance of capital. Business owners should consider other types of financing before relying on this expensive option.
How cash advances work
Our cash advance helps you plan for a successful future. Get fast access to the working capital you need to grow your business.
A Business Cash Advance is repaid either daily or weekly, via a business’ merchant processor or via a daily ACH debit from your bank account.
The daily or weekly remittance amount is based on a percentage of daily sales. As a result, there is no set term of repayment. The front page of your agreement should have this clearly stated.
Your total repayment amount may range anywhere from 9% to 47% more than the funded amount. This is called the factor. The factor you are approved at could be based on several business attributes. Some of which may include (among others):
Length of time in business
Consistency of revenue
Seasonality of the business
Your total repayment is calculated by multiplying your advanced, or funded, amount, by the factor.
For example, if I take the following:
Cash advance: $100,000
Then the payback amount would be $125,000.
In terms of payback, most business cash advance transactions take four to twelve months.
Advantages and Disadvantages
Like any finance option, there are advantages and disadvantages. And it’s your responsibility to do your research and determine if this funding option is right for you.
What are the advantages:
You can qualify even with bad credit
You can receive funding quickly
Newer companies (6 months in business) can still receive funding
What are the disadvantages:
Higher cost than a traditional loan
Daily or weekly payments instead of monthly
So you’ll need to determine, does this advance allow you to increase revenue or avert an acute business crisis. If so, then the higher cost of a cash advance option may be worth the investment.