When the Rothschilds invented banking back in the 1800’s they did something that had never been done before. They loaned money to the government to fund a war.
The business of lenders giving out loans that are called Cash Advances or a Business Cash Advance has also been around for hundreds of years. It is the technicalities of it that constantly change.
Plain and Simple, the Business Cash Advance that is available to all businesses nowadays is a “loan” which is secured by the companies future receivables.
Technically speaking, it is not a loan. The “lender” is buying your businesses future sales. Back in the 1980’s the term most commonly used was “receivables lending” or “factoring”. Today it is called a Business Cash Advance.
Just like a typical person can walk into a check cashing store and get a cash advance against his or her future payment. Businesses both small and large, can get an advance on sales that will come in, in the next few month.
For example a service company; like a flooring company, a general contractor, an architect. They make a sale, they get a contract, but they will only see the revenue from that sale in 3 – 6 months time. Meanwhile their employees have already started working on the project and they need to be paid.
They will try to get a loan from a typical lender who will look at assets to secure the loan. By the time the loan goes through underwriting, they will already be in financial trouble. So the business owner will look for a Business Cash Advance that will in essence buy the invoice today, and pay Eighty cents on the dollar.
Although the business owner does not want to give up 20% of the sale, the business owner needs to ensure their employees are paid.
Companies offering Business Cash Advances are everywhere. The nice thing is that these “lenders” are able to process applications quickly. Many times they can tell you general terms of the “loan” over the phone.
You may want to read: Why Interest Rates are so High for Small Businesses.