Cash Advance: The Alternative to Company Credit Cards

May 18, 2016

 

So your business is in need of a remodel and equipment replacement. Pronto. As in all of your equipment has failed and you need to purchase all new ones, and you can’t run your business without them. It’s clear you might need a loan or some quick cash, but you don’t want to use your company credit card or you know the bad credit will prevent you from getting the loan you need. 

 

If your business has ever been in a similar situation, then a cash advance is usually your best bet, and can be offered by your merchant services provider. Typically, a merchant can give another business a cash advance with the idea that the merchant will receive a portion of their future credit card sales. Due to the way this is structured, a cash advance option would be most ideal for a business that (1) has a strong sales component, as portions of their sales will be given to the cash advance provider, and (2) they might have bad (or lack of) credit and therefore unable to get a traditional loan. The point is that the business needing cash needs it now so it does not disrupt the flow of their business so they may continue doing whatever is necessary to achieve their sales goals. 

 

Another great reason this would benefit a business is that you skip the traditional interest rates paid out over time at a fixed rate. Instead, the amount the business pays to their merchant services provider is proportional to how much they are making from their credit card sales. This can be deemed as less risky than trying to pay off a loan from a bank because the money paid banks on how well the business does with their sales. The merchant service provider does as well as the business does by taking that specific portion of their sales. 

 

Additionally, there is no need for collateral either. It is not a typical loan, nor does the business have to put up some sort of property or inventory - their promise to pay them back relies on their ability to create sales. If the business greatly benefits from the cash advance by being able to grow their business with the extra money, the merchant service provider will benefit just as much.

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