What To Think About Before Opting For A Cash Advance

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As many who have ever jumped into the small business world realize, getting financing is not always the easiest endeavor.  Many want to skip the small steps and just get cash into their hands- FAST. 

Although cash advances aren’t always risky, there are a few things that you should take into consideration before you ride down that road.

Research

Ask yourself, ‘Have I done enough research on the advance?’.  Make sure that you thoroughly research the cash provider before you make anything official.  Do not be fooled by the aggressive marketing campaigns that many merchant cash advance providers have.

Interest

Cash advances can get expensive as interest rates accumulate and add up.  It’s very important to anticipate these expenses before you lock yourself into a contract.  Take the time to read the fine print, and to understand both the rates and the speed at which they rise. 

Business cycle

It’s also important to take into your consideration how rapid your business cycle is.  The short repayment cycles work much better with businesses that have rapid business cycles. 

Last option

When a company takes out a cash advance to pay other loans that is a sign of trouble, and usually the beginning of a very dangerous cycle.  Cash advances should only be used as a one-time thing and not something your company falls back on each time it senses trouble. 

Essentially, cash advances are not necessarily a horrible thing and can be very helpful if your company is backed against the wall.  Although cash advances are risky, for some businesses they are an only option, a viable option.  As long as the necessary research is done before the contract is signed, and the right questions are asked, a cash advance may be a smart financial move.