How a Business Cash Advance Works
In order to fully understand the business cash advance, you must first understand a few very significant terms.
Business Cash Advance Vocabulary Words:
Credit card sales – The amount of money that customers spend at your location, using credit cards.
Credit card statements – Documentation showing each credit card transaction (customer purchase via credit card) that took place in your business. We require at least four months worth of these statements.
Credit card factoring – Selling future credit card sales - receiving cash upfront, and paying back that amount plus a flat rate, over time as a small percentage from the business’s daily credit card sales is automatically deducted and applied to business cash advance repayment.
Holdback percentage – The percentage that is deducted from a business’s daily credit card sales in order to repay a business cash advance.
Repayment term – The amount of time that it takes to completely repay a business cash advance
Renew – To receive another business cash advance after completing or almost completing repayment on a previous business cash advance from the same lender. This process does not require an application, because the application process has already been completed.
Review – To look at an application, the applicant’s monthly credit card sales volume and monthly gross sales volume and determine what amount of money, if any, would be suitable for him/her to receive and what holdback percentage should be applied in order to help and not hurt the business.
Payback – The process of repaying a business cash advance. A small percentage of daily credit card sales is automatically deducted until your advance has been repaid.
Now that you’ve brushed up on your business cash advance vocabulary, you are ready to learn exactly how the business cash advance works.
A process that is known as credit card factoring, allows small business owners to sell their business’s future credit card receivables when they receive a business cash advance.
After submitting an application, one of our trained funding specialists will review your business’s credit card statements and determine how much money you qualify to receive. This is determined by your business’s monthly credit card sales volume. Basically, the higher your monthly credit card sales volume, the more money you can receive via your business cash advance.
Once your application has been approved, your account can be funded in as little as ten business days. These funds can be used with no restrictions.
After receiving your funds, payback begins as soon as the first credit card purchase is made at your business. The predetermined holdback percentage is then deducted whenever customers use their credit cards to buy products and/or services at your establishment. Terms are usually between six and eight months, but there are no penalties for early and/or late repayments. You can renew your business cash advance approximately every three to four months (when you’ve reached 60% repayment completion).