Businesses might need cash quickly to meet their short-term cash needs when other types of financing aren’t readily available, or when qualification for another type of loan isn’t easy. That’s when a business cash advance can be an attractive solution.
Two Business Cash Advance Options
There are two primary business cash advance options. One is a simple business credit card cash advance. The other is a merchant cash advance.
The Business Credit Card Cash Advance
A business cash advance can be obtained by drawing from a business credit card line of credit—assuming that there is enough available credit to meet the business’s needs. The cash can be obtained by going to a local bank or credit union that accepts your brand of credit card and processing the cash advance request with an employee. The advance will likely cost you 4% to 5% of the advance amount and the interest rate can be extreme—23% to 26% is likely, so this is an expensive way to get cash. Also, a large outstanding amount on your card statement may severely impact your credit score.
The Merchant Cash Advance
A business cash advance can be obtained by securing a merchant cash advance (MCA), which is typically a loan against future credit card sales. In this type of loan, a business can get a lump sum payment and then repay the loan with a percentage of credit card sales over a defined period. MCAs can be processed much faster than traditional small business loans and they require minimal paperwork. They can be used for any business expense and no collateral is required. The downside is that MCA’s can be expensive with a high-interest rate. This type of funding won’t help build your business credit score.
There can be better options to secure needed funding including a small business loan and invoice factoring.
Seek Expert Financing Assistance
Contact Lode Capital based in Marietta, GA, for financing made easy. We offer a wide variety of customized financing options that are critical to your success.