Grow your business based on future income with revenue-based financing, also called business and merchant cash advances.
*Qualification criteria, rates, and other funding terms will vary depending on the type and location of your business, and upon other factors. This is not a guarantee of funding, and it should not be relied upon as an accurate assessment of the availability or terms of the represented funding products.
Not sure what you need or what funding options are best for you? Use our simple calculator to get a rough idea of your options with no commitment, and apply when you’re ready.
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Find answers to some commonly asked questions about business and merchant cash advances.
A business cash advance is an option for startup businesses that may not yet qualify for other types of business financing. Because a business cash advance is repaid based on your business’s income, time in business and other factors that can make securing financing difficult for startups don’t apply. If your startup has a strong income, a business cash advance could be an excellent solution for your fast-capital needs.
The benefits of a cash advance make it such a convenient form of funding. Because eligibility is based on the ability to repay the advance, the requirements for this type of funding aren’t too strict, making it ideal for new businesses or those with bad credit or lack collateral. Plus, you can get funding quickly with a cash advance. And, if you have low sales, your payments will stay low too.
The disadvantages of a cash advance can sometimes outweigh the pros. It can cost you quite a bit depending on the factor rate of the cash advance. Plus, there’s no benefit to repaying early like there might be on other funding options.
Pros:
Quick to apply
Good for borrowers with low credit
Low revenue = low payments
Cons:
High cost of capital
Shorter term lengths
Frequent payments
Before taking a cash advance or any funding option, compare it with the other funding options available. Merchant cash advances are a unique form of financing with benefits and drawbacks:
A cash advance can be used for a variety of business expenses. These may include purchasing inventory, covering emergency costs, investing in marketing efforts, managing seasonal sales fluctuations, renovating business premises, or even expanding the business. Essentially, a cash advance provides a flexible solution for any short-term capital needs, offering businesses the ability to handle unexpected costs or take advantage of lucrative opportunities quickly and effectively.
A loan and a cash advance are two different types of financial aid used by businesses, and they come with distinct differences. A loan is a type of debt where a lender, often a bank, provides a lump sum of money upfront, and the borrower repays the amount over a set period with interest. The repayment schedule is usually monthly and the interest rate is typically fixed.
On the other hand, a cash advance is a short-term funding option where the funder provides a lump sum of money that the borrower repays through a fixed percentage of their future sales. Also, cash advances use a factor rate instead of an interest rate to calculate the total repayment amount. This makes cash advances a flexible, but often more expensive, option than traditional business loans.
Here is how a merchant cash advance generally compares to business credit cards and small business term loans. Note that these qualities can change based on the specifics of the specific financing type and the applicant’s creditworthiness.
Merchant Cash Advance:
Credit Requirements: Low
Repayment frequency: Daily or weekly
Maximum financing amount: $2 million
Business Credit Card:
Credit Requirements: Medium
Repayment frequency: Monthly
Maximum financing amount: $100,000
Term Loan:
Credit Requirements: High
Repayment frequency: Monthly
Maximum financing amount: $5 million
When choosing a financing option, due diligence is essential. Also, know that funding timelines vary from funder to funder. While many funders deliver the cash advance to the borrower’s account within 24 hours, a larger merchant cash advance from some funders could take more than a week to arrive.
See what you can qualify for on the Lendio Marketplace.