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Business Cash Advance - A Reliable Alternative to Traditional Business Lending

Written By Wahyu Herdiansyah on Sunday, October 27, 2013 | 9:22 PM

Banks have been closing their doors not only to individuals, but to small businesses also when it came down to lending activities. Due to inability to obtain financing in turning down economy many businesses were forced to close their doors forever. However, a great alternative to traditional small business lending was put into place, known as a business cash advance. Virtually any business, having a merchant account and accepting credit cards as a form of customer payment can gain access to money quickly and hassle-free.

Amount Of Business Cash Advance Is Tied To Credit Card Sales

Business cash advances are loans partially secured by payments coming from credit card processing companies. The amount of advance a business can get depends on the average monthly volume of credit card transactions. When signing up for business cash advance service a business owner would have to switch card processing to a lender-approved vendor. The loan is repaid through daily draw of credit card transactions, typically ranging from 15% and up, depending on the loan amount and length.

Typical loan repayment terms are around 4-6 months. Once a positive payment track is established by a borrower such process may be repeated over and over again, with higher amounts and more comfortable loan lengths. Such business loans are similar to signature loans, as the funds borrowed may be used for any purpose.

Business cash advances are commonly known as factoring - a purchase of future card transactions by a lender. While there is some guarantee presented by a past credit card transaction volume, lenders undertake quite a significant risk leading to higher interest rates. On average, business cash advances feature a 35% premium on top of the principal amount borrowed. However, with low level of lending transaction volume these days, a business cash advance may be the only borrowing tool available to small businesses.

Application And Approval Process Is Hassle-Free

Application and approval process is easy and fast. Majority of business cash advances are approved and funded within a couple of weeks. Application criteria narrows down to providing recent credit card processing statements, business documentation, and a reference from the landlord. A new merchant account agreement needs to be signed before taking out a business cash advance. Many businesses also need to lease processing equipment that will help to perform daily loan repayments.

Equipment leasing costs, usually being under $100 per month, are a small price to pay for guaranteed funding, ensuring growth and stability of a business. Business owners do not have to worry about raised credit card processing fees either, as most lenders would guarantee same or even smaller rates for merchant services. This is a great proposition for business funding considering current situation with loans and banking for small businesses.

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