Control Your Need For A Cash Advance After a Loss – Part 1
Let’s say you have a business and have no money, and it’s an interior design firm. You have had work already that has been subcontracted and you have an unpaid invoice that is currently on a hold for you. Price will do that, so technically you should be able to manage to make some money, but do you need a cash advance?
Personally, I don’t think you need it. If you have an actual invoice that is certain to be paid relatively quickly, then by all means, take it, if not then don’t. A cash advance can be a costly alternative to the cost of the invoice, but it’d be a cheaper alternative than hiring an outside contractor to come up with your remaining funds. And there are still people who can perform work on an invoice without needing an advance.
Of course, businesses may have other underlying needs. An investment may be required, but so to speak there’s a lot of risks involved in a business deal that includes a cash advance. You do need to be ‘ct slightest devious’ to put together something like this, so it’s not an option many business owners take.
If you manage to get a deal, then this is the least likely to be the simplest and safest cash advance to take. Let’s say you are looking into buying a home, and you actually need this money so you can move into a new home. Cash advances exist in a couple different versions, the direct cash advance, fax loan, or check loan.
With these loans, you simply hand over cash, and the lending company looks at your business and makes a determination on the future life of your company, and then they determine how much they will loan you. They generally loan about 80%-90% of the amount of your future sales. The benefits of this are that you get the full amount of the invoice depending on sales, but you only pay back a portion of the invoice back with the other half is returned to you when you close the deal, and you end up with a negative balance of the invoice when you either pay it back or settle it. So you end up paying the lender a negative amount. If bad things happen while you are using the loan, then you have paid back less, and the lender didn’t make money off of you either. And, if you are smart as I have been….You will build relationships with your suppliers and such by actually referring them customers to them so that you don’t have to pay. Once you establish this kind of business y cooperation with the lender, then you can get paid back after you use the money.
I know, this all seems very complex. Let me make it simple by telling you what a direct cash advance does. The lender will tell you how much they are willing to lend you. It is typically only about 70-80% (if there are no pinch points). They usually upfront about their fees, but if you can’t afford to pay it you should check to see what the timeline of the loan is.
There are other cash advance lenders, but I do not recommend them. There are reputable lenders that will provide you an advance with at a 6% fee. With a cash advance there is no requirement to buy goods, but rather you simply must be able to persuade funds to move. If you are sales will be required. It is also required that you don’t have more that $5M in commercial property. You also must be in business for at least 6 months, and you must not have had any reports or credit checked on your personal credit.
There are pros and cons to assistance companies like this, and I am certain there are many since I have been involved with them in the past, but I am not going to say anything negative about them, as you can expect working with them is a new experience. They will be here to help you to test the waters and see if your deal is workable initially, so then you and they can move further along if this is what you want and hopefully get the whole process started.