August 4, 2016 | Categories: Blog Back to list

Choosing The Right Cash Advance Program For Your Business

Choosing The Right Cash Advance Program For Your Business

The ability to obtain additional cash would allow you to take advantage of an opportunity that would otherwise slip right by. Rather than missing out on something that could increase your profitability in the years to come, why not find a partner who is willing to advance that cash? As you check out viable options, make sure you keep these essentials in mind.

How Does the Partner Determine Eligibility?

Any partner who provides advancements to business owners has some type of standards and procedures in place. For example, your Accounts Receivables must average over a certain amount over the period of the last fiscal year. Others may place more emphasis on monthly collected revenue, averaged over the last calendar year. Understanding what criteria you must meet will help you know if talking with that particular partner is worth the effort.

How Much Will the Partner Advance?

Even if you meet the standards set by the partner, is it possible to secure an advancement that is enough to accomplish your goal? Maybe the partner is willing to provide up to 80% of what you need. That’s nice, but you are not in a position to secure the remaining 20% from another source. Unless you are approved for the full amount you need, it pays to keep looking at other funding sources.

You may find that the partner is willing to advance more than you need. The temptation to grab the extra cash is tempting, but think before you proceed. Unless you have a specific plan for that additional sum, it would be too easy to squander it and achieve nothing. Assuming the partner is agreeable, go for the amount that is necessary to fund the project and let that be enough for now.

Fixed or Variable Interest Rate?

What sort of interest comes with the cash advancement? You may prefer a fixed rate, since it’s easy to project how much you will have to pay back in exchange for the financial support. Should you have reason to believe that the average rate of interest will decrease in the months ahead, it pays to look closely at how the variable rate term is structured. You may find that some partners will charge a fixed rate for the first six months or so, then switch to the variable rate. When you have strong evidence that the average rate will decrease and stay that way for however long it takes to repay the advancement, the latter will be your best bet.

What Do You Think of the Repayment Terms?

The advancement will cover the expense associated with the opportunity, and the interest rate makes you feel warm and fuzzy. Now it’s time to look at the terms for repayment. Are you sure that making those payments on time will fit into your corporate budget without any problems? If you can add that line item to the operating budget and still have the money to take care of day to day expenses, it makes sense to proceed.

Remember that partners offering this type of service often move faster than other funding sources. If you are approved today, the money could be in your business operating account by tomorrow. Once you have the funds in hand, use them to the best advantage. With the right approach, you and your partner will be happy with the result.

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