What Is A Cash Advance?
A cash advance is a purchase of your business future receivables/sales/income. The business pays back the money lent through a fixed percentage of its daily sales via the credit card processor or as an ACH from your business bank account.
When paid back as an ACH it is a fixed payment amount daily (sometimes weekly) that is pre-calculated as an estimated percentage of your daily sales. When paid back through the credit card processor it is a percentage, so the payment varies based on your sales for that day.
A cash advance is easier to obtain than a traditional bank loan or term loan. Your credit score can be less than perfect and you need just the last 4-6 months of bank and/or credit card statements along with a one page application for an approval. You don't have to use collateral to secure the debt and you can have the money in your account within 24-48 hours.
How Can I Use It To Profit and Grow My Business?
A cash advance is great for taking advantage of opportunities. If an opportunity arises where you need money quickly to make it happen, we recommend a cash advance!
When conventional sources are used up and you don't have enough business profits to cover the cost of this new opportunity or you don't want to use them, personal sources become unavailable, and a bank loan would take too long, your credit is too low, or assets for collateral are already tied up from another loan, we recommend a cash advance!
Benefits Of A Cash Advance
1. It is a new capital source: using your future revenue as an asset versus a traditional loan using equipment or real estate as assets.
2. Growth Investing: The cost of a cash advance is higher than more traditional sources due to speed and ease. However say you have the opportunity to invest in a $80K piece of equipment that after all estimates and analyses shows that it can produce over $250K for your business in just one year - you should totally make the move for a cash advance. Don't limit growth when opportunities arise.
Ex: Cash Advance is $80K at a 1.30 for 9 months. The payback is $104K which totals $24,000 you are paying back on the $80K. This still leaves about $150K of profits before taxes for your business growth. That is $150K you would not have had if you did not jump on the opportunity and take out the advance to make it happen.
3. Great for Emergencies: Roof repair? Damage from weather? Break down of equipment? You can receive the money in 24 -48 hours from applying that way you can keep your business operating when other sources would have taken much longer and slowed your sales.
When We Would Not Recommend Using a Cash Advance
When you need to solve a problem like lack of cash flow or making payroll using a cash advance is just adding fuel to the fire; digging a hole into more debt. With a daily withdraw and short payback term a cash advance is not always great for cash flow as you are paying it back super quick. An SBA or term loan with a low monthly payment is what is necessary for cash flow improvement. For more information on those products please reach out to us or visit our website.
Merchant cash advances and short term business loans are often criticized for high rates and daily/weekly paybacks over a short term (anywhere from 4 to 18 months). People say they are bad deals, scams, loan sharks, etc. The truth is this financial product is not a loan (even when sometimes expressed as one). It is quick money and easier to get than a bank loan or term loan (thus the expense) and when used for the right reasons (as demonstrated above) can be extremely beneficial to a business and its growth.
We hope this post was helpful. If you have any further questions or would like to get in touch with us regarding funding for your business, please call 888-316-5359, email email@example.com, or visit our website at www.livecapitalfunding.com.
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