What is Cash Advance

Business cash advance was originally based on a one-time payment to the company, in exchange for the agreed percentage of future credit card and / or debit card sales. The term is now commonly used to describe a variety of short-term (usually 24 months) and small payments (usually daily or weekly payment) is characterized by small business financing options, rather than the larger monthly payment and a longer payment terms traditional bank loans. The term “cash advance” can be used to describe the purchase of future credit card sales receivables or short-term working capital loans.

Advantage

Without collateral and guarantees

Poor Credit may not a problem

Easy to apply, no endless paper work

Quick approval and funding

Use and repayment methods

There are usually three different repayment methods:

Split Payment: When the credit card processing company based on credit card sales agreement between the parts automatically split the business and funding companies. This is usually the most common and preferred way to collect repayment for business and funding companies, as it is seamless.

ACH Payment: After sending the fund, the funding company directly collect its repayments from the business’ checking account by ACH. When structured as ACH collection, funding company will collect a fixed amount daily or weekly, regardless of the sales business.

Lock box or a trust bank Payment: all credit card sales are sent to funding companies bank accounts, after deducting the repayment amount, the rest will be transferred to the business through ACH, EFT or wire transfer. This is the least preferred method because it causes a business day delay of receives of its credit card sales .

Industry

When small businesses think the opportunity is more than the cost, they will apply small business loans and cash advances. This means that small business owners are vital to emotional financial decisions. If small business owners are optimistic about the economy growth, they will be more likely to expand, upgrade and investment. Fortunately, small business optimism index soared in December 2016 to almost unprecedented highs, reaching 105.8 points. Mining figures, 32% of small business owners think now is a good time to expand. Most small businesses do not have the cash on hand to fund their expansion, but will have to rely on external funding, such as cash advance and small business loan.