What to Know About a Cash Advance for Your Business

Businesses sometimes need to get creative with how to get the capital to grow their business. One alternative loan often used is a cash advance. Here’s what you need to know before applying for one.

Basics

Sometimes a business needs a short-term solution to meet their cash needs. A merchant cash advance may be just what your business needs. A cash advance Bordentown NJ essentially provides the business money by selling future sales. The structure of the loan depends on the lender, but repayment often starts right away. This can mean that the lender debits money regularly out of your account or by taking their portion of the sales as they come in. You can receive funding immediately to get help your business meet a large order, buy necessary equipment or meet payroll needs while waiting for funds to come in.

Repayment

While the loan is based on future credit card sales, repayment works much like a regular loan. The lender provides your business with the funds and then you repay them as agreed until the balance is zero. The lender takes a retrieval rate or percentage of the credit card sales typically between 8% to 13%. Most companies take money daily, but the how is dependent on your agreement.

Amounts

The lender calculates both how much funding to provide and how much must be repaid. By providing past credit card sales, the lender can base the amount to lend by using past numbers to calculate future sales. They look at average monthly sales and then may fund as much as 150% of those sales. The company may also want to see bank statements along with the credit card transactions to determine the financial stability of the company. The repayment amount includes a factor of 1.09 to 1.50 of the total amount lended. That factor is then added to the amount borrowed for a total repayment amount.