Small business owners often need cash for the growth of their business. While many opt for bank loans or a line of credit, sometimes the applications may get rejected for reasons like poor credit score or unavailability of collateral. However, that is not the end of the road for young entrepreneurs whose loan application got rejected. They can opt for small business cash advance which is an alternative source of business funding. It is more like an agreement than a loan. In this case, the money lender buys a portion of the future credit card sales while business gets a lump sum amount with the absolute freedom to use it the way he/she wants.
Following are some of the purposes that cash advances serve and then we get to why they are gradually getting so popular.
Why apply for a cash advance?
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For business expansion: Every business wants to expand and thus, needs the capital to execute the business plans. Expansion can mean hiring new staff or expanding to new geographies or bringing newer range of products and services. If you have enough capital to run the day-to-day business, then future ambitions can turn into a reality with the cash advance which can fund your next big step.
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To purchase new equipment: Growing your business is not possible without increasing production, which in turn requires new equipment in form of machinery or computers or vehicles. Cash advance can be used for the fast purchase of new assets to help in business expansion.
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To stock up on inventory: Any business wanting to grow must have goods in stock. As your company name gets popular, there will be a rise in demand that must be met within a short period of time unless you want to lose those customers. Buying inventory is important for meeting clients’ orders without waiting for replenishment of resources. The business cash advance is often used to cover funding for inventory and pay suppliers immediately.
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To restructure debt: Debt consolidation helps in focusing on a single debt and managing finances better, and also save you money in the long run. By restructuring your existing debt, you can reduce the number of EMIs and the amount of your total monthly repayments. Cash advance is a way of refinancing your existing company loans and freeing up cash for working capital and expansion.
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To seek fresh talent: Successful businesses are headed by a strong founder but no business is a one-man show. Companies need efficient, dedicated, innovative and hardworking employees for businesses to reach new heights. If you lack the capital to hire new staff members, using cash advance could be the best answer. It can also be used to pay the salaries of the existing staff during a cash crunch.
Advantages of taking a cash advance
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Easy application process: Compared to traditional loans, applying for a cash advance is simple. The borrower does not need to stand in a queue at the lender’s office with an application form. The process of application and approval take place online. You can find all the details on the lender’s website. In case you are wondering how soon you can get the money, you will be glad to know that you can get it within hours.
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Hassle-free funding: The funding is not just quick; it is extremely convenient too. There is little paper work involved and the whole affair requires little time and energy. The process of verification is not lengthy and no detailed questions are asked about business operations and future plans. The approval rate is also quite high.
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Simple payback: The collections process of the loan is also equally simple. Since the repayment process is revenue-based, the payback is subjected to sales made in a particular month. It means you repay more during a busy month but have the comfort of paying less during a lean phase. The percentage-based collection model allows a business to stay afloat.
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No credit score checks: Credit score is one parameter on which most traditional loans are rejected. If your credit score is poor, financial institutions will levy an extremely high interest rate in case they agree to give a loan. But in cash advance what matters is your sales and not your credit health.
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No need for collaterals: Secured loans levy a smaller rate of interest but make collateral a must-have. A cash advance requires no collaterals. It is unsecured in nature and keeps your personal and business assets safe.
There was a time when a cash advance was not a preferred choice as those applying for it were seen as businessmen who failed to get the nod from traditional lending institutes. However, today, it is seen as a potent financing tool for small business owners trying to fund their growth. Experts suggest that as long as owners borrow the amount they need and not want, and make sure that the capital is productive and repayment remains within reasonable reach, taking a cash advance is a good idea because of its many benefits.
