Where To Get A Small Business Cash Advance
Many smaller and medium sized firms are stretching to make ends meet
, and this is where the concept of a small business cash advance starts to look enticing. Many businesses have been shut out of usual business financing as those avenues have been restricted or shut down due to larger lending restrictions and tougher approval standards.Alternative lending sources have cropped up to fill the void. Many of these are small business cash advance lenders. These "advances" are not technically loans but are regulated as "advances" against future credit card receipts. Usually, these cash advances are sold to those firms who may not be able to get conventional bank financing and need money quickly.
While this certainly may be many businesses in a difficult retail economy, what merchant lenders don't always say is that these unregulated business advances often come with requirements to switch credit card payment processors, and interest rates that are variable and in excess of 50%, as well as high upfront fees just to apply.
Additionally, many cash advance lenders also will hold back a daily percentage of sales as payments for their short term loan. Because they regulate the processing, they are able to require this percentage as yet another stipulationmandate|requirement} of getting the funds. State usury laws do not typically apply to cash advances, only loans, so cash advance companies are able to require high levels of interest legally. The upside with these advances is that they can work with a much wider set of credit situations than a traditional bank loan and a business normally gets the money faster.
Other alternatives to the cash advance have also {cropped|popped| up recently as well, and have blended the best attributes of the cash advance while removing some of the more costly requirements. One of these is known as CCRF, or credit card receivable financing. This is a true, regulated business loan that has rates which are approximately 50% less than a merchant cash advance. However, as an alternative financing source, this type of loan can work with a wide variety of credit scenarios that would not be considered by a commercial SBA-backed type loan. Additionally, there are no upfront fees or stipulations to switch credit card processors.
As it turns out, the small business cash advance, while convenient, may not be the best way to go as new alternative business loan sources have come on the scene that build on the positive aspects of this product, such as convenience and underwriting flexibility, while removing the some of the more difficult aspects, such as high rates, fees and difficult funding conditions.
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