Read the latest news about alternative business finance.
What makes a cash advance different to a small business loan?
As an independent business owner you will have lots of ideas about how you can invest money to make your business work better; whether it’s upgrading your computer system, buying an extra van to make deliveries, or re-vamping your shop floor. There are a variety of ways to expand and grow your business, but it can be difficult to free up the cash needed to make these important developments.
However, according to new statistics, almost 500,000 UK businesses started 2018 in ‘significant’ financial distress. This is an increase of 36% in just one year, showing that recent events are putting a strain on independent businesses. Businesses faced a tough twelve months, with the cost of business for smaller companies currently at its highest since 2014. Rising inflation, the weak Pound, increased interest rates and political uncertainty combined to damage cash flow last year.
The traditional way for businesses to raise finance has been a small business loan, but with this type of lending becoming more and more difficult to secure, a large number of businesses are now losing out on growth and investment opportunities. A business cash advance is fast becoming a better option, due to the ease of application and flexible nature of repayments.
With many business owners are still unaware of alternative funding options available to them, we look at how a business cash advance is different from a small business loan.
A business cash advance is an agreed sum of money advanced to you against your future credit and debit card turnover. Your business needs to accept card payments to qualify, and the amount advanced is typically up to the value of one month’s card sales.
Your repayments will rise and fall in line with your card sales, meaning you don’t have to struggle to find a fixed monthly payment. Small business loans are generally fixed and don’t take into account your actual sales – you’ll need to make repayments whether you make sales or not.
One of the biggest benefits of a business cash advance is the speed in which the application is processed.
Unlike small business loans, business cash advance providers do not ask to see business plans, accounts, forecasts or require security (all they need to see is your recent card processing statements). The application can take a matter of minutes and a decision made within 24 hours, with funds reaching your bank account in as little as 72 hours.
Not only does this mean your home and business assets are safe, it also means there’s a lot less paperwork to fill out! Applying for a small business loan from a traditional bank can take weeks or even months to process, and if your business has encountered an unexpected expense or a sudden demand for additional stock, this kind of immediate risk-free finance could be the difference between survival and closure.
A business cash advance is typically repaid in 6-7 months. Small business loans are generally medium to long term finance and many providers will charge you for settling your agreement early. With a Quick Capital business cash advance, you’ll never be charged for repaying your advance early.
Research has found nearly half of independent business owners consider flexibility to be one of the main factors when sourcing business finance. With a business cash advance, a pre-agreed percentage of your daily credit and debit card takings is deducted automatically, meaning you only pack back the advance when you earn money from card sales.
If you’d like more information on how you can use a business cash advance to invest and grow, enquire online or call us on 0800 3777 402.