subject: When to get a Small Business Cash Advance [print this page] When to get a Small Business Cash Advance
If you run a small business you will run into situation where you need additional funding. Chances are you borrowed money, or brought in outside investors to start your business in the first place. Since you had enough time and prior planning for this investment you most likely got a competitive interest rate. If you looked for venture capital instead, you probably presented your business plan, made a pitch and hopefully came to an equitable arrangement. These are both examples of slow funding however. Slow funding is appropriate for things like starting your business, or paying for large scale expansions like office space or a complete equipment retooling.
But what if you need money immediately? Your options depend on your resources. If you have available credit for your company you will most likely want to dig into that first, depending on the interest rate that is due. But this will be the fastest way to get money. If however you don't have any available credit, it is either used or you never applied to get any, you may want consider getting a small business cash advance. We will discuss the details of this type of funding below so you can put it in it's proper context.
A small business cash advance works more like a loan than a line of credit. Once you go through the approval process you are given money immediately, and most cash advance companies offer some form of direct deposit or bank transfer service to make this even easier. Unlike a loan from a bank however, you will most likely not need to present a formal business plan to the lender. They will also not need to see all of your business records for the last 10 years, but instead will likely only need some accounting worksheets for the last 6 months. As the loan must be repaid very quickly, they need a short term picture of your company, the big picture matters less.
Also a business loan typically requires either personal guarantee or an established business credit score. Cash advances may require personal guarantee, depending on a number of factors which are case by case, but they will not require a business credit score. The other big difference between an advance and a bank loan is the interest rate. A long term loan will have single digit interest rates, its not uncommon for an advance to be over 20%. Because of this reason, you should use them with caution.
