In business, cash is not only the most important thing, it’s everything. Without it, you cannot pay bills, make payroll or handle emergencies. Therefore, you need to find out everything it takes to get a cash advance for your company.
Good or bad, everything you do for your business has an effect. Making the right choices is essential. That’s why you need to know the pros and cons of getting a cash advance and whether it is the best decision for your company.
What exactly is a Cash Advance?
A cash advance is a common term that businesses use to describe a type of business loan. The term is becoming more popular in the past 10 years or so, since alternative financing companies are now competing against banks.
The definition of a cash advance is when your business pledges your future receivables as collateral in exchange for a specific amount of money. Unlike a traditional factor arrangement, your clients will not know you are pledging your receivables.
A financing company will give you a certain amount of money and you then pay it back in small daily or weekly payments. Those payments come out automatically from your bank account.
A cash advance is immediate business funding that you can get in place in 24-72 hours and requires very little paperwork. Typical cash advances are $5,000 to $150,000 in size.
That sounds simple. Are there any disadvantages to a cash advance?
There are usually application fees for business cash advances. These fees will be taken out of your fixed amount. For example, if you are eligible for a $10,000 cash advance, the $1,000 application fee is taken out of your amount, giving you a total of $9,000.
One of the disadvantages of a cash advance is that even if you pay back the advance early you will still be paying the same amount you would pay if it takes you six months. For instance, if you get $10,000, you will pay back $15,000 regardless of whether you make all your payments within six months or if you pay it off early in one month.
Why a Cash Advance Might Seem Appealing to Some Companies (and Why it’s Not)
Small business owners know that financing troubles are a way of life. Still, there are several options, especially now that alternative lenders have come on the scene to help.
Getting a small business loan can seem like an exercise in futility. The truth is that a majority of small businesses cannot qualify.Banks try to bury you under tons of paperwork that will take you and your accountant weeks to complete. In addition, they require a stellar credit score and flawless finances.
The most important aspect they ask for is enough collateral to cover your emergency business loan. This may include real estate, capital equipment or vehicles. Unfortunately, many small businesses don’t have the necessary collateral.
You may be able to qualify for a home equity line of credit. However, in this instance, you must pledge your residence as collateral for a quick business loan. The biggest problem with this is that, if you have any difficulty repaying the loan, you risk losing both.
As a result, a cash advance might seem ideal. After all, every business has accounts receivables, right? It offers better flexibility than a traditional business bank loan. When you are growing your business, you need this kind of agility to use your money as you wish.
Pledging your account receivables could look like the easy answer, but it’s not. Every lender will meticulously examine all your clients. They need to ensure that the debt will be paid. Therefore, your clients need to be in good financial standing as well.
To reassure themselves, some lenders will insist on taking control of your accounts receivable. This means that all payments from your clients will go to them, not you. When this happens, your clients will know that you are experiencing financial difficulties. They might even decide that working with you is too uncertain and take their business elsewhere.
This situation could also create a domino effect. Word of mouth will help to spread the news of your financial troubles. Your credit rating will plummet and it will be next to impossible to obtain any type of immediate business funding.
Are There Any Easy Alternatives to a Cash Advance?
A business line of credit (LOC) from Financing Solutions (www.financingsolutionsnow.com) is more flexible and less expensive than a cash advance. It can be used by for profit businesses or nonprofits that have yearly revenue from $150,000 to $7 million.
Your line stays open for one year and you can renew it annually with no renewal fees. Best of all, our line of credit has no application or maintenance fees.
Your business can receive a precise amount and you can use some or all of it at any time. Unlike a cash advance, if you pay back the line early you are only paying off the balance. This makes it much less expensive than a cash advance. More importantly, it’s easy to get in place. Go to www.fscreditline.com and answer 10 simple questions to start on the road to financial freedom. We will send you a written offer letter and we do not run a credit check until after you decide you want to move forward.
A LOC is great for a backup plan for short term business expenses or opportunities. Every business should have a line of credit in case of emergencies or unexpected business opportunities. Having access to capital is the number one best way to handle business issues and to reduce stress for a business owner.
Everything You Need to Know about Advancing Your Business
You already know that, in business, if you are not moving forward then you are falling behind. It’s crucial to continually assess your direction, your pace and your goals. This is the only way to develop and grow. There are numerous aspects to evaluate and measure as you go.
The market
Customer wants and needs are constantly evolving. What was hot and desirable yesterday might be old news tomorrow. You must distinguish yourself from the competition and solve the unmet needs of your target audience. For example, instead of asking what features they like about your product, ask what they are trying to accomplish by purchasing your product. This will help you determine how you can increase your value. In other words, if your customer is trying to build a better mousetrap, build one yourself and sell it.
Your customers
Many companies convert a lead into a customer and then forget about him. Of course, you need to appeal to new customers but you cannot neglect your current customers in the process. It is far less expensive to keep the customers you have than to go out and attract new ones. Keep them coming back for more to develop a loyal base and brand devotion. When you do this well, you won’t have to work so hard to bring in new customers because your old ones will do it for you. Word of mouth, positive reviews and recommendations from happy customers carry far more weight than any marketing or advertising you can ever create. If you provide incentives, such as a rewards program or referral discount, the process will work even better.
Social media
What if you could talk directly to your customers, know their aspirations, meet their friends and know what is on their minds. With social media, you can. This important tool allows you to join the conversation, engage in actual dialogue, prove your value and stay in the forefront of their lives. Then, when it comes time to make a purchase, they will automatically think of you first.
Employees
When your employees are miserable, your business will suffer. They are on the front lines of customer service and product quality. Unhappy employees can destroy your reputation with surly attitudes, inferior performance and negative online reviews. It’s crucial that you listen to their concerns, provide opportunities for feedback and always make payroll on time. If you don’t do these things, it’s certain that your competition will.
Branding
In times past, a company would simply create a product or service, make it available and leave it at that. Today, however, we must concern ourselves with how we define our business and how we want the public to see us. This takes knowing your business inside and out, telling your story and giving customers a one of a kind experience at every touch point. By building a brand, you show your personality, showcase your unique voice and make your customers a part of your story. When done well, you give yourself an identity, establish core values and let customers know what to expect from you.
The importance of fast business financing
You can have the best product in the world and a multitude of ideas for expansion. Still, none of that means anything if you don’t have the quick business capital you need to take advantage of it all. If your business can use some financial breathing room, give Financing Solutions a call.