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Why Do SMEs Prefer Business Cash Advances to Traditional Loans?

 If you’re a small or medium size business owner, it may make sense to take out a Business Cash Advance as opposed to a traditional loan. In financial terms, it is a generally new concept that allows companies to raise capital without the constraints of bank regulations and penalties.

Basic Concept

The underlying principal of the Business Cash Advance is that your company can borrow a set amount – usually between £5,000 and £100,000 – and only need to make repayments once sales are completed.

Every time a customer completes a transaction with their debit/credit card, a percentage of this sale will be paid back to the lender until the full loan has been reimbursed. In essence, you’ll only pay when the business starts making money itself.

The percentage of these repayments will depend on the lender but will often be around 20%.



Qualifying for a Business Cash Advance isn’t as difficult as it is for a business loan or overdraft, although there are a few stipulations to adhere to.

For a start, your company must accept card payments via a card terminal provider and usually have been trading for over 12 months with a history of income during that time. No extensive credit checks or detailed views into your accounts are required.

Benefits of Business Cash Advances

The flexible nature of a Business Cash Advance linked with company sales is highly desirable for many SME owners. You only pay back when money is being made – if sales are down, repayments will follow suit.

Unlike fixed payment finance from traditional bank lenders, there’s no an inflated APR charge, monthly payments or hidden extras to worry about either. There’s only the initiation fee to be paid up front, a settled figure which will depend on the lender.

Some business owners may be confident of making a profit when the company is up and running but can’t quite raise the capital to get off the ground. They may need to purchase new equipment, hire more staff or invest in their marketing strategy before sales increase. With a Business Cash Advance, funds can be raised to make this all possible.

Another benefit for SME’s is that access to these loans is often quick, sometimes within 24 hours. The application process is relatively straightforward with minimal forms to complete, unlike a traditional loan or overdraft. Likewise, you usually don’t need to secure the Business Cash Advance against assets or the business itself.

The freedom that the Advance gives to a business can be invaluable. Funds are raised in a short time and can be spent on anything you wish, with no rigid charges to contend with. Repayments also won’t cause you hassle as they’re taken automatically once a sale is completed.

Taking one out doesn’t restrict you in other areas of the business either. For example, you’ll still be able to keep 100% of cash sales, and can also still take out a traditional loan if required alongside the Business Cash Advance.

For more information on Business Cash Advances why not read how they work here

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