Business Cash Advances - Are They Good For Business?

I deal with many lenders in regards to financing all stages of business. Some of these lenders offer both business and personal credit options.

But, as many of those seeking credit in today's market realize standards for these loans have really increased - almost to a point that only those who don't need money are the only ones that qualify.

Most lenders want to see very high credit scores - high meaning in the stratosphere. They also want to see very low debt-to-income ratios (both personal and business) and very high income/revenue levels.

I don't blame these lenders as this financial crisis we are in increases their risk of getting repaid.

While these increased standards are making it very hard for businesses to get funding for expansion and growth, there does remains a few options that do not require above average credit and high income levels. One of these is Business Cash Advances.

A Business Cash Advance is not really a loan. It is an advance against future credit card receipts. If your business accepts credit cards as a form of payment from customers, these Business Cash Advance lenders will advance funds (cash) to the business based on future credit card sales.

There are a few requirements. First, the business must be in operation for at least 4 months and accepting credit cards as payments for this time. Although many of these cash advance providers require one year in business - there are some that only require 4 months at a minimum. Second, the volume of credit card sales must be above $2,500 per month on average.

Most advancers will advance amounts equal to your six months past credit card sales (four months if that is all you have). If your last six months of credit card sales has been $2,500 per month - you could receive up to $15,000. The higher your monthly sales - the higher the amount you can be advanced. There are also times that if your total sales (not just credit card sales) are very high - they may advance much more than your average six month credit card sales. For example - your six months sales are $10,000 per month (or $60K over the six months) but your total sales are $20,000 per month. Thus, your business may qualify for a $100,000 advance (not just the $60K).

There are no set repayment schedules for these advances. The lender simply takes a small portion of future sales to repay the advance. These usually range around 5%. So, if you bring in $5,000 per month in credit card sale, the lender would take $250 for the month to apply to the advance still leaving the business $4,750 in working capital. The real upside here is that if your business has a slow month - say only brings in $3,000 per month - the lender still only receive 5% or $150 and the business receive the remainder.

In talking with several lenders who offer numerous financing options - including Business Cash Advances - they have been seeing the largest increase in request for Business Cash Advances than any other financial loan product.

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