A business cash advance (BCA) isn't for every business, but it is an attractive alternative for some companies. Read on to determine if a Business Cash Advance (BCA) is right for your business and how to choose a partner. If your business is looking for funding options for your business plans, you have multiple options. Conventional banks, SBA loans, equipment loans, crowdfunding, invoice factoring, hard money lenders and much more. But arguably most underutilized, channels of funding is a business cash advance (BCA). But with so many various partners with different rates and terms, how do you know which is the best one? Bizlender can assist you in understanding the process.
So what is a business cash advance?
A business cash advance provides owners an advance of the monthly sales revenue regularly moving through the business account. A business cash advance (BCA) is not a loan, but rather an advance based on the future revenues or credit card sales of the business. In a common situation, a contract between the lender and the business on specific terms like the advance amount, rate, holdback percentage, term, and total payback amount. Once these terms have been agreed to, the funds are transferred directly into the companies business account, with the agreement that, the business promises to pay a percentage of future receivables. The total payback is based on either a holdback percentage of the daily processing batches or a portion of the available daily balance in the business's account. BCA funders judge risk swiftly by using a different set of underwriting guidelines than a traditional bank has to go through. Business cash advance funders are interested in the history of daily receivables and credit card receipts, previous payment history and whether the business can pay back the advance promptly. Instead of using credit and collateral as primary decision points.
Advantages of a business cash advance
Now, that you have the basics of a business cash advance and how it works. Let's look at some of the benefits connected with them.
1. Higher approval rates Business cash advances are frequently examined for their high approval rates. Whether you have bad credit or are in a high-risk industry, it's not going to prevent you from getting a BCA. Your credit score could be 500 and, as long as your receivables align, and your statements are good you could still get an advance.
2. Collateral not required There's no collateral associated with a BCA advance. It's a sales transaction, and nothing is reported to the credit companies. The funder is the one taking all of the risks.
3. Flexible use of funds Traditional lenders have restrictions on how you can use the funds they lend, with a BCA you can use the funds any way you want. Whether it's marketing, expansion, advertising, buying equipment, paying workers, purchasing real estate, leases, or anything in between. It's yours to spend how you please.
4. Manageable payback The natural payback process is the most attractive attribute for a BCA. Since the advance is revenue-based, you only have to pay back the advance in small portions either with your nightly credit card batches or small daily increments in relation to the volume of sales your total.
Five tips for determining the best financial partner
Once you have decided on a business cash advance, you'll discover that there are numerous providers. Below are some guidelines for choosing the best BCA provider:
1. Compare rates and terms. Since BCA funders are essentially giving you money in return for future sales, the rates are higher than traditional lenders. There is no collateral required, but they want the risk needs to be meriting. As a result, there are higher rates and fees. The rates can vary depending on a few factors, so do your research.
2. Analyze industry experience. Industry knowledge can be a significant factor in being satisfied with your advance. Make sure the partner you are considering has worked with other businesses in your industry or with comparable revenue models.
3. Ask for reviews and search reputation. BCA providers may have a well-designed website and enticing content, but does the company live up to its claims? Communication is critical, and you'll be speaking with your lender a lot during your repayment process, which will be a more relaxed experience if you are comfortable with your lender. Research online and browse reviews. Ask around if you know business owners who have used BCA's before for their own companies. Customer service is worth its weight in gold and can create a smooth and manageable funding experience.
4. Read the fine print. It's crucial that you read the entire contract carefully consider all terms before endorsing any agreement with a funder. BCA providers are technically not actual lenders, so merchants have little aid from government regulatory commissions should the relationship go astray. Be sure to review the entire contract for legal protection.
5. Trust your instincts. Think about whether an individual partner seems right for your business. Is there a genuine interest in your business, or does it feel like you are just another client?
Researching alternative lending options for hiring? Check out BizLender online or call 855-404-3070. Offering lending solutions since 2013, their professionals put the emphasis on working smarter, not harder, using technology to fund small businesses in as little as 24 hours.