There is a wide range of funding timelines in the financing world. For example, a loan from the Small Business Administration (SBA) can take as long as 3 months to be approved and reach your bank account. That’s a long time to wait if you're facing urgent needs.
Cash advances fall on the opposite end of the spectrum. These financing products can fund in just 24 hours, empowering you to take fast action when necessary. There are a handful of other loans that move this quickly, but they typically require more application paperwork on the front end than a cash advance. Cash advances are considered to be one of the best options when time is of the essence.
The Nuts and Bolts of Cash Advances
To keep everything streamlined, the dollar amounts for cash advances top out at $200,000 and the repayment terms last only 2 years. You pay a premium price for the expediency of these loans, with interest rates beginning at 18%. For this reason, cash advances are generally considered a situational remedy and not a sustainable financing method.
With this type of financing, you leverage future credit card processing receivables in order to qualify for the money you receive. The repayment process begins as soon as you get the money, with a percentage of your credit card deposits withheld for the lender each day.
You won’t run into many limitations on how to spend the money from a cash advance. Nearly all business-related expenses are fair game, including inventory, operating costs, advertising, equipment, hiring, or acquisitions.
How to Get a Cash Advance
Once you’ve chosen the best cash advance option for your small business, you’ll need to prepare for the application. Don’t worry—it won’t be a tedious task. The most important documents you’ll be asked to provide will be 4–6 months of bank statements. Possible other inclusions are tax returns, AR (accounts receivable) summary, or profit and loss statements.
Be aware that lenders may require you to provide a guarantee if you are requesting a big cash advance. This requirement isn’t necessarily a reflection of your worthiness as an applicant, but it serves as an extra way for them to minimize risk.
The reason for the relatively lean application for cash advances is that the qualification is based more on what’s ahead than what’s in your past. So credit scores and other financial metrics from earlier years take the backseat to your current business performance. If your daily revenue is healthy, so are your chances for approval.
This present-day focus of cash advances makes them perfect for small businesses with credit blemishes or that haven’t been operating long enough to build a track record. Speaking of credit issues—another benefit of cash advances is that the review process is so noninvasive you won’t have an inquiry appear on your credit score.
While it’s beneficial to know how to get many different loans, a cash advance could end up being just right for you. It all depends on the finances of your small business and how you intend to spend the loan money. But it’s definitely nice to know that there are options available when you need rapid funding.
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California loans made pursuant to the California Financing Law, Division 9 (commencing with Section 22000) of the Finance Code. All such loans made through Lendio Partners, LLC, a wholly-owned subsidiary of Lendio, Inc. and a licensed finance lender/broker, California Financing Law License No. 60DBO-44694.