Business Cash Advance Strategies - Problems to Avoid

One of the most important commercial financing needs for any business is ensuring that short-term cash requirements are successfully met. This is frequently a difficult task. Even thriving small businesses frequently need more cash than they can borrow from a bank. The use of a viable business cash advance strategy has become an increasingly important commercial financing tool for many businesses faced with a potential short-term cash shortfall. However, as noted below there are a number of potential problems to be anticipated and avoided when businesses seek a business cash advance.

USING CREDIT CARD RECEIVABLES

One of the least-known commercial financing strategies for small businesses is potentially the best strategy to quickly obtain needed cash for growing their business. This commercial financing strategy uses an under-utilized business asset (credit card receivables) to obtain a business cash advance based upon a merchant's sales volume. A business cash advance typically varies from $5,000 to $300,000. Small businesses will frequently benefit from converting future cash flow into immediate working capital. The most likely candidates to benefit from this business cash advance strategy are restaurants, bars, service businesses and retail stores.

CREDIT CARD FACTORING

This strategy is also known as "credit card factoring". Many small businesses have relied upon a commercial financing strategy called "receivables factoring" which allows them to sell their future receivables at a discount. Most small businesses cannot adequately document their receivables in order to qualify for this kind of commercial financing. Many other small businesses (such as restaurants, bars, service businesses and retail stores noted above) simply do not have such receivables to rely upon as a commercial financing tool.

What these businesses do have in many cases is documented sales volume and documented credit card sales activity. It is this documented level of sales volume and credit card sales activity that becomes a financial asset to the business. Business cash advances up to $300,000 can be obtained based on a merchant's sales volume and future credit card sales.

TEN BUSINESS CASH ADVANCE PROBLEMS AND RECOMMENDED SOLUTIONS

Before employing this strategy, small businesses should realize that there are several recurring potential problems that they need to anticipate. Ten common problems that small business owners should avoid when employing this strategy are highlighted below. Preferred/Recommended business cash advance requirements are shown after each potential problem.

BUSINESS CASH ADVANCE PROBLEM NUMBER 1:
Up-front fees

Preferred and highly recommended business cash advance requirement: No up-front fees

BUSINESS CASH ADVANCE PROBLEM NUMBER 2:
Closing costs

Preferred and highly recommended business cash advance requirement: No closing costs

BUSINESS CASH ADVANCE PROBLEM NUMBER 3:
Financial Statements required

Preferred and highly recommended business cash advance requirement: financial statements not required

BUSINESS CASH ADVANCE PROBLEM NUMBER 4:
Collateral required

Preferred and highly recommended business cash advance requirement: collateral not required

BUSINESS CASH ADVANCE PROBLEM NUMBER 5:
Fixed term to pay off the business cash advance

Preferred and highly recommended business cash advance requirement: No fixed term for repayment

BUSINESS CASH ADVANCE PROBLEM NUMBER 6:
Fixed payments to pay off the business cash advance

Preferred and highly recommended business cash advance requirement: No fixed payments

BUSINESS CASH ADVANCE PROBLEM NUMBER 7:
High credit scores (680 to 700 or higher) required to qualify

Preferred and highly recommended business cash advance requirement: Credit scores of 500 or better

BUSINESS CASH ADVANCE PROBLEM NUMBER 8:
2-3 years or more in business required to qualify

Preferred and highly recommended business cash advance requirement: 1 year in business

BUSINESS CASH ADVANCE PROBLEM NUMBER 9:
12 to 24 months of documented credit card sales of $10,000 to $25,000 or more required

Preferred and highly recommended business cash advance requirement: 6 months of $4,000 or more

BUSINESS CASH ADVANCE PROBLEM NUMBER 10:
Maximum business cash advance of $10,000 to $50,000

Preferred and highly recommended business cash advance requirement: Maximum cash advance of $250,000 to $300,000

Not all of these potential problems will be relevant to each commercial borrower. Most commercial borrowers will encounter at least 2-3 of these problems if they are reviewing business cash advance programs that use credit card receivables as the basis for obtaining short term business loans. It is not necessary to accept ANY of these problems in order to obtain business cash advances based on future credit card sales. There are viable credit card receivables programs which avoid all of the problems described above.

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