subject: Small Business Cash Advance Process: Somthing To Consider For Your Business [print this page] Small Business Cash Advance Process: Somthing To Consider For Your Business
If your business is in need of funding there are different ways to obtain it. Most business funding for new companies come from personal savings or from friends and family. You should never invest personal money in to a business that you cannot afford to lose, same goes for money borrowed from friends and family. They can be a great resource in your new venture, but if you lose your money this could cause problems that you are not prepared to deal with.
Alternatively you can seek outside funding for your company. You can seek venture capital by presenting your plan to venture capitalists, if they decide they like your business they may decide to invest. But this leads to additional issues, what if they have a different vision for your company? What if you don't feel comfortable sharing the reigns? If this is the case, you'll want to get a business loan. Loans come in many forms, but for today's topic we will be discussing the small business cash advance.
The process for obtaining a small business cash advance differs slightly from other types of business loans. For one, a business loan would require you establish the credit worthiness of your company. To do this you'd have to present detailed accounting documents and also allow the lender to pull your businesses credit score.
Remember the credit score for your business is not the same as yours, it is on a different scale and the company must borrow money and repay it as a separate entity to build its credit. Unlike this, a cash advance usually just requires a quick check of your day to day operating budget and profits for the last few months to a year. Advances must be repaid very quickly and so your long term prospects or history are not really considered.
There is a price to be paid for this easy approval however, and that is interest. While traditional long term loans will have interest in the single digits, it is not uncommon to see a small business cash advance with interest as high as 20%, this is because they realize they are taking on additional risk in lending to a company without a lot of credit history or established business revenue or profits Likewise, the time allotted to repay the advance is typically much shorter than for a business loan. Usually up to 60 days with extensions possible up to 120 days under special circumstances.
