Credit Card Cash Advance - Revealed

Small business owners are using alternative methods of business financing more frequently.  Still for some, these bank loan alternatives, such as the credit card cash advance, remain unfamiliar territory. 

Credit card cash advances are in the news, in advertisements and rapidly traveling from mouth to ear amongst small business owners.  Nevertheless, I have reason to believe that there remains a large portion of small business owners who have not heard about the credit card cash advance, or have heard misconstrued descriptions, examples and definitions of it.  Unfortunately, these uninformed and misled small business owners may be missing out on extra cash to be used on business advancement and development.

I would like to clear up any confusion that there might be about the credit card cash advance.  Based on these solid facts, you should be able to determine whether it is the right business financing option for you.

Eligibility

Eligibility requirements for the credit card cash advance are basic.  As its name hints, excepting credit cards is one of the most important factors for eligibility and most of the other requirements stem from this crucial requirement.  For example, you must own a merchant business (you cannot process credit card sales if you do not sell any products or services).  Your business must process at least $5,000 in monthly credit card sales, you cannot be a home-based business and there must be at least one year remaining on the business lease.  You also cannot have any unresolved bankruptcies. 

Background

Credit card factoring began about a decade ago.  Since then, it has taken the difficulty and stress out of business financing for many small business owners.  Recently, during the credit crunch, it has been a lifesaver for many small business owners, as the credit crunch has eliminated bank loans as a financing option for lots of small business owners.

Explanation

You get a lump sum of cash in exchange for a small percentage of your business's future credit card sales.  That means you can get cash now and pay later.  Once you receive your funds, the payback begins.  When a customer uses his/her credit card to make a purchase a small percentage of the sale goes toward repaying the credit card advance and the rest of the sale goes to you.  This "split" continues to take place until the entire advance has been repaid.

Benefits

The credit card cash advance allows small business owners to get funds much more quickly than other methods of business financing allow (in as little as 10 business days).  The requirements are also much looser, allowing for a larger portion of small business owners to be eligible to receive these funds.  There is no collateral required and borrowers do not need to have excellent credit scores. 

Setbacks

The credit card cash advance is limited to merchants, those that operate retail and service-oriented businesses.  This of course is due to the method in which the advance is repaid. 

This type of business financing is also more expensive than the bank loan and meant to make a way for those who are ineligible for bank loans for one reason or another.