What is the working principle behind business cash advance?
Advances
works in the same manner as that of invoice factoring. The process of
invoice factoring involves selling of sales ledger or a specific part of
the sales ledger to a group of funders or individual funders. It
provides immediate cash to the company and the sales funder gets paid
when the pending ledger invoices of the company are settled.
With
business funding, the business sells its revenue stream that will be
received by future credit card receipts against the business. The
process starts by evaluation of sales from credit cards for a given
period of time and a certain portion of this amount is paid to the owner
as cash advance. The funder receives the money from those sales after
they are made.
In both of these cases, there is a fee involved
depending on the amount of cash advance which is charged by the funder.
Depending upon the terms of the agreement, fee amount and other costs
vary accordingly. The rate of interests depends on the level of risk and
flexibility offered from the funding group.
Major issues involved in business cash advance!
There
are a lot of advantages of businesses using advances as compared to
regular bank loans. These are easily available to new businesses and a
business need not to have a strong credit history to get approval for
business advances.
No comments:
Post a Comment