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A Business Cash Advance Is Different To A Traditional Loan

A business cash advance is an excellent way of raising capital for small businesses. In fact, in the UK, the business cash advance has become one of the most popular methods of financing a small enterprise. Many budding entrepreneurs fail to get their ideas off the ground because they are unable to obtain start-up finance from traditional sources like financial institutions and banks.

It must be pointed out that a business cash advance is not a loan. As its name implies, it is an advance given against a company's future profits. Let's take a look at how a business cash advance works. The provider purchases a certain number of credit card receipts from a small company and then gives a business cash advance against the receipts.

To reiterate the fact once again, this form of borrowing does not work like a loan. The money will be paid back to the provider via the merchant account. As such, the debtor does not personally repay the amount. This enables small companies to manage their cash flow more effectively. Another reason for the popularity of these advances is that no collateral is required.

The amount advanced depends on the applicant's debit or credit card turnover. Usually, a business cash advance is between 10,000 and 20,000 pounds. However, advances as small as 3,500 or as high as 100,000 pounds are not uncommon. It all depends on the credit/debit card turnover.

Another good aspect of a business cash advance is that there is no restriction on the reason for wanting it. In other words, it can be used for anything. It does not have to be used as start-up capital. This is why there is no necessity to provide business plans as required by conventional lending institutions. It can be used to fund marketing campaigns, or staff training, or to upgrade the company's premises. Alternatively, debts can be paid off, or the money could even be used to invest in stocks.

The structure of this form of lending is easy, quick, fair, and flexible. It's easy because the applicant simply supplies proof of credit/debit card transactions. It is quick because the money is paid into the applicant's account within 10 working days. It is fair because it is paid back through a percentage of future debit/credit card transactions. Therefore, the lender only gets paid when the applicant does. A business cash advance is flexible because the use of the funds is not restricted.

If you think that a business cash advance sounds suitable for your needs, the criteria to be met is simple. Firstly, you must prove that your monthly turnover is more than 3,500 pounds and that you have been operating for at least 12 months. You also need to provide statements and be able to process debit or credit card transactions.

The biggest advantage of a business cash advance is that there are no fixed monthly repayments. The money is paid back in accordance with the company's stability. Furthermore, a business cash advance is not subject to any hidden fees.

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