CASH ADVANCES
Cash advances are similar to factoring except that the capital provider purchases future receivables at a discount. With factoring the funding company buys invoices already generated at a discount from their face value, and then collects the money direct from your customers. With factoring this business has already occurred and is less risky to the lender. A cash advance on the other hand, uses historical information from your previous deposits to determine an amount of your future receipts that will be purchased at a discount.
Once you receive the cash advance, repayment is made from future revenues being purchased and deposited by taking only a small percentage from future payments you receive electronically. The advantage is that cash advances do not affect your credit rating, and enable you to continue to receive ongoing revenues from your clients' payments. There is no “interest rate”. Your future receipts are purchased for less than face value, the difference being the “discount rate”.
CASH ADVANCE BENEFITS INCLUDE:
Businesses who have been turned down or are not eligible for traditional financing can receive the capital they need
You are not required to put up real estate or personal assets
Since payback is based on cash flow, payback can vary with business activity
