A Business cash advance, or merchant cash advance as it is also sometimes referred to as, is a form of unsecured business finance. They are generally seen as a flexible and short-term means of borrowing, designed as a way to inject working capital into a business quickly.
It is significantly different from other financial products in many aspects. The primary difference between a business cash advance and other forms of finance is that the borrowed amount in this case is automatically repaid by using the revenue of your future card transactions.
In this article, business cash advances will be discussed in detail and important questions such as what is the maximum amount which can be borrowed, and who is eligible to receive a business cash advance, amongst others, will be answered.
How Can a Business Cash Advance Benefit Your Business?
Business cash advances can be used to fund business growth, purchase stock, or to aid cash flow. If a capital injection is what your business needs, a merchant cash advance can prove to be an ideal option.
A business cash advance is relatively easy to obtain. It is also a fast option, which means that you can react quickly to any unexpected opportunities or expenses. The borrower may also experience an increase in profit as it has the potential to significantly improve the cash flow of a business.
Business owners can greatly benefit from the amount of flexibility that a business cash advance has to offer. As your agreed repayments always rise and fall in line with your cash flow, you are unlikely to experience any financial strain when paying off the credit.
Moreover, any payments that you receive in cash or cheque on top of the agreed card payments will not be utilised towards repayment of debt which means that you get to keep all of your non-card income.
How Much Can You Borrow Using a Business Cash Advance?
The amount of money which can be borrowed using a business cash advance depends on several factors. Not only does it vary from lender to lender, but it also depends on the volume of your monthly card transactions. On average, lenders will be able to advance an amount from £3,000 to £150,000 and above.
Your circumstances and needs will also play a crucial role in determining how much money you can borrow using a business cash advance. When you get in touch with a business cash advance provider, you will have a conversation with their finance expert and they will be able to determine, in less than an hour, your maximum borrowing capacity.
How Much Does It Cost?
When a business cash advance is approved for your business, a repayment amount will be immediately disclosed to you. For example, if you have agreed to borrow the amount of £20,000, you may be asked to repay £24,0000. It is difficult to predict the amount of time that it takes to repay the credit as repayments will be linked to your revenue. With greater revenue, the time that you will take to repay the debt will also be lower.
The link between revenue and repayment makes it difficult to make an APR comparison, but the certainty of cost upfront certainly counterbalances any unfavourable deviation from the agreed repayment. A fixed percentage of your revenue through the card terminal will be utilised for the purpose of repayment and any amount that exceeds this percentage will be for you to keep.
Businesses which do not accept payments from their customers through cards may not be eligible for this type of finance.
How Quickly Can Money be Raised?
Business cash advances have gained a lot of popularity in recent times owing to the flexibility that they offer in terms of repayment, the ease with which it is approved and most importantly, the speed with which the credit is provided to a borrower. These features ensure that companies can access business cash advances quicker than any other form of finance and use it to address their financial concerns without much delay. It has already helped thousands of businesses and has become a popular form of finance in the UK.
Benefits of Business Cash Advance
Business cash advances work in a completely different way to most other types of business funding, and due to its unique features it is known as an innovative and helpful product. The following are some advantages that a business cash advance has to offer to those who decide to opt for this type of finance:
Moderately Poor Credit Scores Are Acceptable
Unlike other financial products wherein a poor credit score can instantly disqualify a loan application, business cash advances are secured by the incoming card payments. Owing to this security, lenders are willing to extend this advance to businesses with minor adverse credit, provided their current financial position is strong. Compared to other unsecured business finance products, a business cash advance has a much higher approval rate.
Funds Can Be Raised Quickly
As the application process is fairly straightforward, if your loan application is successful, it is possible for you to see the funds reach your bank account in less than 24 hours. Needless to say, it is the quickest form of finance that you can avail compared to other types of business borrowing.
Flexible and Scalable Funding
The credit which is available to you through a business cash advance increases as your card takings increase. If your business needs funds quickly and is suffering from growing financial pains, cash advances may be the right choice for you. In addition, the amount that you repay every month is linked with your card takings.
As a result, when you are experiencing a slowdown in your monthly revenue, the repayments will also be lower making it easy for you to keep up with the debt and survive financially difficult times.
You Get to Keep What Remains
The repayment amount corresponds to a fixed percentage of your card takings. Any amount that you earn above this percentage is yours to keep. Before your revenue hits your account, the payment is deducted which means you do not have to worry about repayment or accumulation of interest due to late payment.
As we can clearly see, there are many benefits to using a business cash advance, not least of which is a quick injection into your business when you most need it.