Getting a cash advance can be very expensive, and are largely looked down upon. In fact, many politicians want to ban them altogether. But really, business cash advances are loans like any other loan; they have a certain time and place where they are useful, and other times when they are not. We will discuss how to make this distinction, and when perhaps they aren’t worse than the alternative.
First, I’d have to say that those wanting to ban advances probably don’t know living paycheck to paycheck first hand. Some people simply don’t’ have a nest egg to deal with emergencies, and there are some emergencies where borrowing money fast is simply a necessity. Let’s say for the sake of argument that you suddenly lose your job and are doing temp work to make up the difference. You have money coming in still, but there is a long delay when you get a new job. Typically you don’t get paid until 2 weeks after you do the work. This could prevent you from paying next month’s rent. Isn’t a 10% fee worth keeping you and your kids off the streets? In the real world there are times when borrowing, even at high interest is a good choice. Taking this choice away ultimately give poor individuals even less leverage and power over their lives.
Having laid out the importance of having this choice, even if the choice is between two bad options, I must now offer a few words of caution. You should never use a cash advance for anything that can wait. This includes any sort of frivolous expense. You should never borrow in this way (or any really) to pay for entertainment or unnecessary goods. If you do you are likely not financially disciplined enough to pay off the loan on time and will need to borrow again to pay off your first loan. This can create a vicious cycle of paying high interest over a long period of time that you should avoid at all costs. Remember, only borrow at over 15% interest when you absolutely must, only for short periods of time, and only with a clear plan to pay off the loan in full quickly. If you can’t do all of these things I highly recommend you use other resources instead. As always, please seek professional advice before making any sort of financial decision that you are not comfortable with and make sure you understand whatever agreements you are signing.