If you’re looking for finance as an SME, then you might consider taking in money from an outside benefactor. This might mean borrowing from friends or family, or from investors with whom you haven’t had any prior contact. It might mean going to a bank in search of a loan.
One popular kind of finance in recent times has been the Business Cash Advance (or merchant cash advance). But is this type of loan right for you? Let’s take a look.
What is a Business Cash Advance?
A business cash advance is a type of loan that’s based on your revenue and sales. Instead of paying back the loan with fixed monthly amounts, you pay it back based on how much money you’re making. It’s calculated according to your business’s takings on credit cards.
Loans of this kind afford greater flexibility. If you’re going through a rough patch, then you won’t have to worry about defaulting. Conversely, a spell of prosperity will help you to get the loan paid back more quickly.
The total cost of a business cash advance is agreed up-front. This means less risk on the part of the lender, which in turn means that deals can be considered and agreed upon more quickly. You won’t spend too much time waiting for a decision – which, when the situation is urgent, can be a very good thing. Often, you can get approval within twenty-four hours.
There’s also no need to stump up collateral before being approved. Since Business Cash Advances are a kind of unsecured finance, you don’t need to put any of your assets on the line. This is obviously great news if you don’t have many assets to put forward in the first place.
What can a Business Cash Advance be used for?
There is a range of circumstances that might call for a business cash advance.
You might decide that you need to move into new premises. The potential benefits of doing this might far outweigh the cost of the finance. If your company needs to cut costs, then moving to smaller premises, perhaps supplemented by a remote workforce, might make sense.
If you need to hire new staff to deal with a shortage or to cope with your business’s expansion, then a business cash advance might help you to do it. It’ll also help you to put in place a better, more thorough recruitment and onboarding process, so you can give your new hirelings the best chance of hitting the ground running.
There might also arise an emergency situation where you need liquidity quickly. A major client might fail to pay on time, or you might suddenly face an unexpected bill. A business cash advance will allow you to get the money right away.