How Does Merchant Cash Advance Work?
The three businesses listed differ somewhat in the way they manage their cash advance model. But the underlying mechanism is the same. Money is quickly loaned to a qualifying business, on the basis of future funds they are expected to receive, usually as invoice payments or regular income.
When unsecured, businesses are typically well-vetted to make sure that they are unlikely to default. As interest is usually very high, businesses must pay loans back quickly in order for the service to be affordable, though this is understood from the beginning.
What Businesses Can Benefit Most From a Cash Advance?
Any business that has trouble maintaining operations, investing in important expansions, or funding businesses initiatives due to unpaid invoices or other cash flow issues will likely benefit from the cash advance model. These include some of the smallest businesses, as long as they are equipped for credit payment and maintain business or accounting software to communicate with the lenders’ systems.
Is Early Repayment Possible With Cash Advances?
Early repayment is almost always permitted without penalty. If not, a potential borrower is encouraged to find a different lender, as this form of financing is only affordable if it is able to be paid off quickly.
What’s the Difference Between Cash and Invoice Advances?
The two are distinct. There are companies that offer both, but most offer one or the other. In the example above, Liberis is the only Cash Advance P2P lender, offering simple loans for many purposes paid off with a daily percentage of future sales.
It is a simple model for borrower and lender. The other two company examples offer revolving lines of credit, against which individual loans may be instantly taken out to pay off new invoices with pending balances. These are quickly repaid when a client pays off the invoice in question, usually after 30 to 60 days.
Note: We list companies offering either cash advance or invoice advances (also known as invoice factoring).