A Business Cash Advance has many advantages over a traditional loan, especially for small or start-up businesses looking to raise capital. Their popularity has risen in recent years, especially as banks and other lenders have become less inclined to lend to smaller companies since the recession.
The main selling point of the Business Cash Advance is the relaxed stipulations for paying back the loan. Essentially, repayments will only start when sales are completed and not on a strict monthly basis.
Here’s how the process works in more detail:
- With a Business Cash Advance, your company can obtain a fixed sum usually of up to £100,000.
- Repayments are only made as a small percentage of future credit or debit card sales. This percentage is decided with the lender beforehand but is often around 20%.
- Making repayments on the Business Cash Advance is actually preferable as that means you’re achieving sales.
- If sales are down, repayments will follow suit. There are no fixed monthly payments, APR’s or hidden costs to contend with.
- The Advance is granted if a simple criterion is fulfilled. This includes having positive cash flow and an expectation of credit/debit card sales over the repayment period.
Simple Application Process
A Business Cash Advance is much easier to obtain than a traditional loan. The application process requires much less paperwork and can be completed in minutes. Traditional lenders require copies of your bank statements, tax returns, business plan and financial projections before they release funds – this level of scrutiny isn’t required with a Business Cash Advance.
Higher Approval Rate
Because company performance isn’t vigorously looked into, approval rate of Business Cash Advances is around 90%. Even individuals or companies with bad credit ratings can be approved a big lifeline for many SME owners.
Due to the simpler application process, funds can appear in your account within a few days. If you’re going through a lean period or simply want to take advantage of an investment opportunity, this access to quick cash can be extremely beneficial. In addition, you’re free to spend it on anything you like, from staff wages to advertising campaigns.
No Collateral at Stake
To guarantee traditional loans, you would need to put up property or assets as collateral. If repayments weren’t met, then personal possessions and perhaps the business itself would be lost. With a Cash Advance, this isn’t the case and the business can continue to grow without the constant fear of losing valuable assets.
The sales-based repayments process is a much safer way to gain finance. If your sales are down then repayments simply won’t have to be made. Your cash flow is never interrupted as there’s no such thing as a ‘late payment’. Without monthly fees or often extortionate APR charges, you’ll have confidence to grow the business without constant fear of financial repercussions.
To find out more about Business Cash Advances visit 365 Business Finance and read about how it works.