According to a recent report by CB Insights, running out of cash and failing to raise capital is the number one reason startup businesses fail. Unfortunately, struggles with cash flow don’t stop in the startup phase. Small businesses regularly face cash flow issues; sometimes, when caught off guard, the challenge is
finding quick funding. Luckily, there are choices for fast financing solutions, although a business line of credit is almost always a better option than a business credit card advance.
What is a Business Credit Card Advance?
A business credit card is a solid tool. It’s especially good for building a strong business credit score from the three major credit bureaus (Dun & Bradstreet, Experian, and Equifax). Credit scores are determined by analyzing a business’s credit limits, payment history, and debt levels. Lenders use business credit scores to help determine their risk level and the borrower’s financial health.
A business credit card is one type of business revolving line of credit, and payments made on time help boost your credit score.
If you need money in a hurry, a business credit card advance allows the cardholder to draw cash from the card if it’s within the credit limit. Most business credit cards allow only a specific amount of available credit to be used as cash, so checking the advance limit on the card is crucial.
Some business credit card advances allow you to withdraw cash from an ATM. Otherwise, you can visit a bank or other financial institution to get the money. If you go to your business bank, you’ll be able to deposit the funds directly into your account.
Why Not a Business Credit Card Advance?
Although a business credit card advance is a quick solution to access cash, there are a few downsides:
- High-Interest Rates: Rates on cash advances vary but typically run higher than the purchase rate—23% or more.
- Initial Fees: In addition to the interest rate, many credit cards charge an initial fee on business credit card advances. The fee could be a flat charge or a percentage of the amount withdrawn, which could get pricey.
- No Grace Period: Business credit card advances start accruing interest immediately.
Fortunately, there is a better solution to help fund a small business cash shortage, such as a business line of credit.
What is a Business Line of Credit?
Like a business credit card advance, a business line of credit is a business revolving line of credit. Unlike a traditional business loan with installment payments, a business line of credit is a short-term loan, and you only make payments on the money you’ve withdrawn. Then, once the withdrawn money has been repaid, the total credit amount is available to borrow again.
When a business owner considers where to get a business line of credit versus a business loan, the purpose of the loan is the first consideration. Business loans are typically for large amounts of money to be paid back over a long period and for major projects such as expanding a building or purchasing an expensive piece of equipment. A business line of credit is usually for a smaller amount of money a company owner keeps on hand for emergencies such as meeting payroll, paying for supplies, or other unforeseen expenses.
Getting a business line of credit is a faster solution than getting a business bank loan, with a less complicated application and quicker approval process.
Not all business lines of credit are created equal. You may have heard of line of credit business loans at your local bank, but there may be better solutions for your business. Some business lines of credit require you to pay maintenance fees on the loan, whether you use it or not, while others only charge fees on the amount you’ve withdrawn.
Business lines of credit can be secured or unsecured, with the secured business line of credit being tied to the borrower’s collateral or assets. Collateral reduces the risk for the lender, so secured business lines of credit have lower interest rates than unsecured business lines of credit. However, with a secured line of credit, the borrower risks having the assets seized if the payments are not made on time.
Alternatives to a Business Credit Card Cash Advance
Financing Solutions is an alternative lender offering an easy application process (it takes less than two minutes to fill out) and requires no collateral or documentation for a written offer letter for a business line of credit. Other alternative lenders have a much longer application process and can be more expensive.
The founders of Financing Solutions have started and grown several companies together; therefore, they understand how important it is to keep costs low. That’s why we don’t charge you to set up the credit line and don’t charge maintenance fees. We don’t ask for personal guarantees, and applicants can receive a no-obligation offer letter the same day. We make approval decisions based on our decades of experience working with small businesses. Find out today why we have five-star ratings from the Better Business Bureau and Google. Highlights of our business line of credit include:
- There are no costs to set it up or keep it in place
- The easy 2-minute applicationonline application
- If approved, you’ll receive a same-day, no-obligation offer letter
- The fastest setup, 48-72 hours
- Once you have the line of credit, requests for funds are wired to your bank in minutes
- You can use your line of credit whenever needed
- Inexpensive when used (low fees)
- There are no restrictions in place or collateral required
- No personal guaranteeis required, either
- Financing Solutions is a leading provider of lines of credit
- We are a reputable company with an A+ & 5-star rating
- You can pay off the line whenever you are ready
- The credit line is easy to renew and renews yearly
- You have a secured account portal access 24 x 7
A business line of credit is a good funding resource available whenever your company needs it, without the heavy burden of term loan requirements. If you want to see if your small business would be approved and for how much, please fill out the no-obligation, 2-minute line of credit application here.
