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    2 Replies Latest reply on Jun 5, 2008 11:11 PM by MRFINANCE

    Need Advise / business loan vs business cash advance

    gardenia01 Newbie
      I am business owner and need funding for restocking and expansion. I received a call from a company offering funding via business cash advance. This company advertised their funding no application or closing fees, no collateral required, no stressful fixed payment schedule, no personal guarantee well too much information that just made me doubt this type of funding. I am doubting this type of funding for the simple reason that it involves my business daily sales and our terminal. I worry thinking they will get total control of my sales and instead of helping my business put my business into trouble with this type of funding. The idea of no collateral, no closing fees etc is great however I have been in business for 7 years and would hate to make the wrong decision. How can I make sure this company is not a false company. This type of funding is new to me so I am not too convinced however I need funding for my business fast so this is why it got my attention. An advise from an expert would be appreciated. Thank you.
        • Re: Need Advise / business loan vs business cash advance
          Bridge Navigator
          "Cash Advances" are also known as factoring. This type of loan has been repackaged lately to make it look more appealing because "factoring" companies got a bad reputation.

          Make no mistakes, it is a loan. They give you money and you pay them back more than they gave you. Typically, "low interest rates" are off set by high/hidden fees. The total cost of the loan ends up being more.

          I am sure I will get slammed by all the cash advance bloggers but that is my opinion.

          I am a former VP of Finance for a public company and have been brought into several companies to help turn them around financially.

          Start with the basics, why do you need a loan? How much do you really need? How will you pay it back?

          You mention restocking - is inventory rising? What happened to the money you got from selling your previous inventory - use that to buy new inventory.

          If it is the same story that customers pay slow but vendors want payment quickly, remember that you are your vendors customer. Either adopt your customers payment strategies or your vendors payment demand strategy.

          Collections can not lag payment terms. Some customers might need to be cut lose - if they do not pay or slow pay are they worth it? Offer discounts from prompt payment - much better then factoring receivables.
          • Re: Need Advise / business loan vs business cash advance
            MRFINANCE Adventurer
            Cash advance is not for everyone and it is a little more expensive...but if you have a good business purpose for the money, like expansion, and the banks won't give you the money, it is an excellent vehichle.
            All costs are stated upfront. What is actually happening is a typical FACTORING situation. The advance companies like Richton Funding, are BUYING the top 25% of your future credit card receivables for a pre-determined price. This 25% is taken off the top from the merchant processor not the ADVANCE company. So you ARE still in control of your business. When the pre-determined payback is paid off by the top 25% ,they stop drawing off the receivables.


            Call me for more details.