When you need fast cash that you can pay off, traditional business loans aren’t always fast enough. Business cash advances can provide fast working capital when you need it the most.
Business cash advances (BCAs) are upfront cash injections into your business in exchange for a percentage of future credit card sales. To make this possible, BCA companies partner with credit card processing companies.
When you apply for a BCA, you’ll agree to a factor rate, which is similar to an interest rate. A factor rate, represented by a decimal fraction (ex. 1.20) determines the cost of your advance and your repayments. Once you take your advance, you will pay the advance back automatically through your credit card sales.
Your repayment method with a BCA is very different than the repayment method of a term loan. As such, BCA providers evaluate the risk of financing you differently as well. They will assess your credit card sales, as well as many other normal indicators such as:
· Your credit score
· Your time in business
· Your business financial records & debt schedule
A business cash advance can be the right choice in one of several situations.
If you don’t qualify for business term loans, you likely still qualify for BCAs. Your application will be assessed differently, and less weight will be placed on your credit score. If your credit card sales are consistent and high enough, the BCA provider may be willing to overlook a lower credit score. They may also be less stringent regarding your other borrowing qualifications.
If you need funding fast, a BCA is one of your faster options. BCA providers are typically quite fast at assessing your application. Due to the nature of BCAs, less documentation is needed when you apply. So, you can expect to spend less time preparing to submit your application as well.
BCAs are better-suited to certain business types. Online businesses that take credit card payments are especially well-suited for BCAs. In fact, the less reliant your business is on cash, the more useful a BCA may be. But even brick-and-mortar businesses can benefit. Just keep in mind that BCAs are a newer form of business financing that focuses on credit card sales.
Overall, if you have a strong sales record, but bad credit, you should look into BCA options.
BCAs are fast, easy, and convenient funding options. But they can be relatively expensive.
The average BCA is significantly more expensive than the average business loan. Your APR with any BCA will likely be well above 30%.
One important thing to remember about BCAs is they are NOT considered business loans. What they are is an agreement for you to sell your future income for immediate funding. As such, they are not regulated in the same way that other business financing options are. The main downside this arrangement creates is that you can end up paying far more than you would from a fast business loan.
There is another thing to remember. Your automated repayments will chip away at your income from credit card sales. While this may be a good option when it comes to the pace of your repayments, it will affect your day-to-day expenses. Until you’ve paid back your advance in full, your BCA will be another serious working capital expenditure.
If you have time to spare and are very creditworthy, you should consider less costly options.
BCAs require some of the same documentation that business loans do. Overall requirements are lower.
Upon reviewing your business’s financial documents, your BCA provider will come up with an offer. Worse credit will lead them to offer higher factor rates. Also, having a bankruptcy on your record will lead many BCA providers to reject your application.
There are plenty of other business financing options for you to consider. The most popular options are installment loans and lines of credit.
Business term loans can be used to cover most business expenses. They can be used to finance a large expense like a software update or vehicle purchase. They can also be used to inject cash into your business when you’re having trouble covering working capital expenses. What’s best is that they can fill these financial gaps in your business at a much lower cost than a BCA.
Business lines of credit are a better option when you expect expenses over the course of the next few months. With a line of credit, you are in control of the funds you draw. That means you’re also in control of the interest you end up paying back. Lines of credit are better options when you’re going through renovations, covering a seasonal drop in sales, and other long-term commitments.
For these purposes, we offer business lines of credit up to $500,000.
Whatever your particular needs, Main Street Finance Group can help. We are here to provide fast and simple financing. Whether it’s a BCA, installment loan, line of credit, or more, you can get approved in a matter of hours.
The Main Street difference is that we don’t believe your credit score or tight schedule should stop you from getting the financing you need. As a small business, we understand the frustrations that come with waiting for other lenders. Because of that, we also offer lower interest rates and won’t ask you for a personal guarantee.
If you’re in need of business financing and looking for extra capital, you’ve come to the right place.
We offer a variety of options for payback, including daily & weekly ACH payments.
We have the best offers and lowest rates in the industry, and can get you qualified and approved within hours with minimal paperwork!
We pride ourselves on our great customer service. We treat everyone who contacts us with respect.