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What Is A Cash Advance?

In the current financial climate, Cash advances or small business loans are becoming a popular option for businesses for a number of reasons. FSB explains what cash advances are, how they work, and what you can actually use them for.

What is a cash advance?

A cash advance is a way for small business owners to gain access to short term funding very quickly. Providing you have records of cash flow in your business, the majority of business loans will be accepted.

If your application for a business loan is successful, the funds can be in your quickly. Having access to the funding so quickly means that your business is able to continue operating smoothly and you are able to put the cash injection to use almost straight away.

What are they used for?

It might sound as though needing a short term injection of funding is a dangerous sign, but business loans can be varied in their application, it might be that your business needs a quick boost of funds to be able to adapt to a changing situation quickly or help ease cash flow after a major expense.

Whatever form they may take, a cash advance is a useful safety net in order to meet the needs of your business. For example, a cash advance could be used for any of the following:

  • To cover a turbulent or quiet period of your business operation
  • Providing you with the immediate capital to expand your business
  • To fund some optional or necessary refurbishments.
  • To take advantage of a gap in the market that you have discovered
  • Fund training for staff

How repayments can work

Business loans do not have to be as daunting as they might sound. Lenders will often work with you to find a level of flexibility in your repayments that is right for you. One of the main benefits present for most business loans is that they are unsecured. Companies today are not guaranteed to have quite so many physical assets as they might have had in the past.

Instead of relying on the monetary value of your assets, an unsecured business loan will instead be calculated on your trading history, financial records, and business projections. As your business assets are not at risk, repayment can work one of two ways. One option may be to negotiate the repayments based on an agreed percentage of your future credit and debit card transactions, while the alternative, if you prefer, is to arrange the repayments through a fixed monthly direct debit.

Regardless of your repayment method a loan can provide a business with a degree of financial flexibility which it otherwise may not have had.

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