As a relatively new product on the British market, a cash advance for business, sometimes called a cash advance for a trader, provides thousands of small companies with a short-term solution to help solve cash flow problems, i.e. cash flow.
The basic assumption is that you can get a cash advance payment for business between £ 4,000 and £ 100,000, which is paid back when your customers purchase products and services offered by your company by paying for them with a card at the terminal. These advances are often used to make investments for business development, as they are easier and faster to acquire than a regular loan from a bank to a company. The percentage that will be your company to pay off each transaction is to be agreed with the lender but usually, it is around 20% of the value of each transaction. These amounts are deducted for the repayment of cash, which we received as an advance payment.
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First of all, you must have a payment terminal to handle debit and credit card payments. The lenders usually also require: a minimum of 4-12 monthly statements from card transactions; minimum payment of £ 3,500 per month, which passes through our payment terminal; standard copy of photo ID; and in some cases a copy of bank accounts for the last month; The number of documents is usually smaller than what the bank demanded from us when applying for a business loan or overdraft (debit), and at the same time the chances of obtaining a positive decision are higher than in the case of an application in a bank outlet where the bank certainly will check our creditworthiness.
How does it work?
After qualifying for a loan, you will usually receive around 85% (sometimes as much as 110%) of the average monthly turnover on cards as a cash advance on business. For example, if during the past year your annual turnover on your cards (from your clients’ transactions) amounted to £ 144,000, it gives us £ 12,000 on average per month. Assuming that we can receive 85% of this amount, you should expect an offer of £ 10,000 for business in the form of a down payment. Repayment follows the percentage agreed upon with the borrower on a daily basis, usually 20%. So, if a customer in the store spends £ 150, £ 30 of this will be returned to the lender towards the advance payment. Repayments are easy, as everything is automated, and at the end of the month, we receive a statement from which it is clear how much has already been paid and what is the remaining amount of the advance to be repaid. This means that business advances are perceived as a flexible solution, as we do not have fixed monthly installments to be repaid. Consider that every day we have card payments from our customers for £ 200, which means that £ 40 (20% of the daily income from the cards) is repaid in advance. But as we know in business there are better and worse days. Suppose that in the period when we have fewer clients, our income from card payments falls to only £ 50 a day. Then what? We can be calm because the lender will take only £ 10 in this case, which is the daily repayment limit of 20 percent.
Which branches of the economy are currently the most willing to use cash advance payments?
In general, cash advance payments for business can be used in any type of business, where only we deal with card payments. However, most often these advances are used: hotel industry; bars and restaurants; sales industry; the cosmetics industry (health and beauty); Car industry; most of the shops, boutiques, etc.
What are the advantages of using a cash advance on business?
Easy to secure – there is no need to secure a loan, which makes it easier to obtain in comparison with the requirements set by the banks;
Simple and flexible repayment option – repayments consist in deducting the appropriate percentage from the sale, usually without any other costs, which means that you can repay liabilities when we are able to, without a penalty for late repayment, as banks usually do;
Use cash for any purpose – once you receive cash, this is your case for what it will be intended for. You can use it, for example, to purchase goods, invest in the employment of personnel, in renovation or even allocate the funds received for the purchase of a new office or store, etc .;
There is no need to change the current payment card provider and – most companies providing loans for business in the form of cash advances, does not impose an obligation to change the provider (provider) providing payment card payment services, and those who do it, they usually care about, so that this process is fast for the client and the least time-consuming.