subject: A Business Cash Advance Isn't Really A Business Loan [print this page] There are a lot of routes to get cash for your business, but not all of them involve a normal loan. A business cash advance is actually a kind of factoring. Factoring is a method whereby a company sells its anticipated credit card sales to a third party - the factor - at a cheaper price in exchange for working capital with which to fund the business quickly.
In today's working climate it is no surprise that a lot of new businesses are having a very difficult time getting approved for conventional business loans through a bank. The banks are overly tight-fisted with their funds at the moment. Luckily business cash advances through factoring agreements are still available and the requirements are considerably less stringent than those located at the local bank.
To acquire a business cash advance, many companies require a business to have been in operation for at least a year and accepting credit cards for at least 6 months. Since repayment of the working capital is directly tied to credit and debit card receipts, proof of this revenues is also needed.
A piece of these future credit card revenues is agreed upon as the daily repayment capture, making simpler the financial burden for the company during a slower period. Unlike a traditional small business loan, the daily capture capability allows business owners to pay back at their own pace instead of being responsible for set monthly payments that could end up in the business going out of business.
Because this working capital is not attained in a traditional loan, if the merchant fails to meet the conditions of the agreement, for example, using different merchant accounts to process payments, they are still held personally accountable for the remainder.
Nevertheless, for many start-up businesses, this form of attaining funds is still optimal. Flexible repayment terms, quick access to needed cash and easier acquisition of said financing, makes a business cash advance a reasonable choice for many business owners.
by: Daniel Samoohi.
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