If you need access to fast cash you have a couple of options. You can get a business cash advance or a have an existing line of credit. Both have some advantages and disadvantages depending on how well you have planned for the future, and your businesses credit worthiness. We will discuss how they compare as it pertains to; time to acquire, approval process, cost, and finally limits.
Time to acquire: A business cash advance is by far the fastest way to get money for your company. If you suddenly need emergency funds, and you haven’t planned to have these funds available on hand this is your best option in most cases. A Line of credit will take quite a bit longer, typically a couple weeks, not including the time it takes you to submit all the required paperwork, and as such isn’t a good solution for emergencies, that is unless you already have the credit line in place. If you plan properly and have available credit or cash for emergencies than this will obviously be a faster way to pay for emergencies.
Approval Process: The advance wins in this category as well. Typically approval is nearly automatic and the amount you are approved for is based on an average of your last 6 months of revenue. You can typically borrow the equivalent of one month’s revenue. Lines of credit on the other hand you will likely have to furnish a business credit report, demonstrate your extensive revenue, profit and loss and furnish additional accounting documents as well.
Cost: This is where lines of credit definitely take the day. Whereas an advance may have an annual interest rate in the high double digits, an advance being borrowed by a company with a good credit standing can have interest in the low single digits. This cost disparity changes even more when you consider the high penalties for late payments on an advance, and the grace period of 30 days applied to most interest on lines of credit.
Limits: The amount you can borrow on a cash advance is usually limited to one month’s worth of salary, while a line of credit can be much more, sometimes as much as 1 years revenue. So inclusion, a business cash advance can be your fastest option if you need money fast, but with better planning you can use an advance to meet the same need without paying exorbitant interest while you are at it.