Role Of Business Cash Advances In Fulfilling Working Capital Requirements Of The Firm

The working capital is the very vital for any business firm

. The working capital helps in understanding the financial situation of an organization. Working capital is excess off current assets over current liabilities. The working capital helps in meeting emergency needs of thee business and helps to analyze the futree cash generation capacity of the firm. It helps in expansion, providing supplies, equipments and other business needs. The regularity in working capital fulfillment is one of the biggest challenges a firm has to face.

The management of all the expenses and thereby maintaining proper flow of working capital is very difficult task. Proper estimation regarding the spending and foreseeing future emergency is difficult task. Proper knowledge of assets and liabilities help in analyzing the proper working capital requirement of any firm. The larger the working capital of a firm, the least is the financial constraint faced by the business.

The improper management will lead an organization having severe affects, and thereby the expansion plans, emergency requirements cant be fulfilled by the organization. The liquid cash expenses leads to improper management of the funds, the firms biggest problem is not seeking any other alternative rather meeting all the contingencies with the liquid cash. The cash or fund shortage leads to the loss in the overall profitability of the organization.

The working capital can be increased by reducing the business operation cycle. In other words it implies reducing the time gap between order taking and its payment. The time gap between thee payment cycle should be reduced for effective working capital management within the organization. For the emergencies many merchants opt for the business loans, which takes very long and is very tiring process. The business cash advances are a much better and advantageous option than other business loans by the bank and other lenders. It helps the merchant in receiving an unsecured loan option for meeting the business requirement of the working capital.

Good credit score accepted: The business loans only provides fund for the good credit score. Poor credit score are rejected and thereby creating difficulties for the merchants.

Heavy paperwork and application procedure: The application process is very timetaking and tiring including high paperwork.

Time taken to provide funds: The time taken for getting loan is quite long and thereby leaving without any options for the merchants for emergencies fund requirement in business.

Huge security collateral and personal guarantee: Huge collateral and personal guarantee is essential for business loans, the personal guarantee requirement is a major setback for merchants, to opt for business loans.

High rejection rates: The rejection rates are very high. The acceptance rate is as low as 10% in certain cases for the approval of business loans.

Application, start up closing fees: Heavy payment is required for application fees; start up closing fees making huge holes in merchants pocket.

The basis of business cash advances is the future credit sale of the merchant and thereby a small fixed amount is reverted as soon as the income is generated. It is more flexible, less tiring, smooth, rapid and user friendly.

by: jain robert

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