Business Cash Advance Lenders: Credit Card Companies vs. Online Lenders | Behalf
Battle of the Business Cash Advance Lenders: Credit Card Companies vs. Online Lenders
Unlike bank loans, merchant cash advances can vary from lender to lender because they are not held to the same strict usury laws that limit how much lenders can charge. While some business cash advance lenders take advantage by charging ridiculously high fees, others use their flexibility to provide short term financing that brings long term benefits to your business.
If you accept credit cards and have significant processing volume, you can access a cash advance through your credit card company. Credit card companies can also be business cash advance lenders, allowing you to borrow money against your expected credit card receivables. It’s often as simple as making a phone call to secure your funds. On the other hand, online business cash advance lenders come in many shapes and sizes. Meaning, all business cash advance lenders offer a lump sum of money but their terms, fees and financial processes differ. Depending on your business needs, some may be a better fit than others. The fast and easy online applications make alternative merchant cash advance providers an attractive option for small business owners looking for a quick financial fix.
Both types of business cash advance lenders boast that they have simple solutions for your business needs. This article offers a detailed explanation of which is the better option for your business.
Credit Card Business Cash Advance Lenders
Taking out a cash advance through your credit card company may seem convenient, but it has major drawbacks. Credit card cash advances are often accompanied by demanding terms. Depending on the terms the credit card company gives you, interest rates can quickly snowball into a hefty sum. There is typically no grace period with a credit card business cash advance, so tricky interest rates start to accumulate immediately. Credit card companies also charge significantly higher interest rates on cash advances than they charge you for financing on your business credit card. It is smart to carefully evaluate your options and use any cash advances cautiously.
Another pitfall of leveraging your future credit card receivables in this type of advance: you are creating a hole in your future months’ revenue. Sure, you know the money is coming so it seems like an easy decision to tap those funds for some quick cash today. But unless you expect your next months’ revenue to grow exponentially, you may have trouble both repaying your credit card company and funding your normal business expenses with incomings. If you revenues aren’t growing, a credit card business cash advance should be your last resort.
Online Business Cash Advance Lenders
In terms of online business cash advance lenders, there are a lot of options out there so it is important that you educate yourself. You can run into the same issues with the wrong online cash advance lender as you would with a credit card cash advance lender. Online merchant cash advances have gotten a bad reputation. Many leach onto your future credit and debit card sales daily, drying up your capital reserve and distorting your business performance. They are expensive and hard to pay off in time, trapping you in a downward cash advance spiral. To avoid harmful online business cash advance lenders, define your business needs and research the safest cash advance for your business. Avoid online cash advance lenders that seek to cripple your business, making you dependent on external sources of income.