At one time, business cash advances were considered a last resort for business financing, but in recent years, the advantages to this type of funding have increasingly come to light.

Availability of Business Funding--Banks

Since the recession of 2008 and 2009, banks have continued to be reluctant to lend to small businesses for several reasons, but it mostly boils down to risk and reward. Banks see small businesses as a bigger risk than other businesses, with a shakier track record and more potential for failure.

It may seem to make sense for banks to "take a chance" on your business; after all, you know you will be diligent to make payments. But banks have many requirements that show them who is most likely to repay business loans, and they have these requirements because too many people have defaulted on their loans in the past and have caused banks to lose too much money.

Another reason bank loans are hard for businesses to get is that bankers don't see small business loans as being worth their time. If you could write 10 sets of paperwork and make the same amount of money as it would take you to write 100 sets of paperwork, does it make sense to spend the extra time writing 90 more sets of paperwork than you need to?

Many banks don't consider small business loans worthwhile because of the extra work required, even if businesses meet the strict requirements of banks -- which most don't. How many small businesses with a few years' operation under their belts have a 700 or better credit rating, collateral to secure their loan, and extremely detailed and accurate records of all their operations?

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Availability of Business Funding - Online and Peer-to-Peer Lenders

Online and peer-to-peer lenders like On Deck and Lending Club specialize in smaller loans including loans for small businesses -- but these loan providers all have different requirements that can make them confusing to navigate. Although their income and credit rating requirements are a little looser than a bank's, having poor personal or business credit can get you disqualified, even if your monthly income is more than healthy. There are also minimum yearly revenue requirements that may disqualify many businesses.

Peer-to-peer lenders can be almost like crowdfunding -- your loan is put out on a marketplace once it is approved, and investors must in essence buy into it in order to fund it. This process can take some time, and once it is funded, you wait a few more weeks for your money. If not enough investors buy in, you may only get some of the money for which you were approved, instead of the entire amount you need.

Another aspect of peer-to-peer lending is that your interest rate varies widely according to your credit score. With the highest interest rate on a $50,000 loan over the typical 60 month term, a business will end up paying more in interest than principal. Are these types of financing really more available and affordable when they have so many requirements and strings attached, and when the interest paid over the life of the loan is so high?

Availability of Business Funding - Business Cash Advances

Unlike banks, online and peer-to-peer lenders, business cash advances have gained greater acceptance for one reason -- they are truly available when businesses need them. No collateral is required, and providers look mainly at the business's recent revenue rather than relying on a credit score to prove creditworthiness. Because companies offering business cash advances are not federally regulated like banks, they can provide financing that others can't.

Business cash advances have a reputation for being expensive, but compared to the peer-to-peer example above the fees are much lower than the interest that could be paid through other types of financing. Fees are typically less than half the amount advanced, making a business cash advance more affordable than other types of financing. Best of all, business cash advances are fast. You will have your money within a week or two, just in time to get you what you need to benefit your business.

Quikstone Capital Solutions has been providing small business owners with merchant cash advances to stabilize and improve their companies for more than 10 years. If you are in need of a cash to cover unexpected costs, or if you’re looking to make long overdue improvements, a merchant cash advance could be right for you. With the ability to quickly qualify and get your money in a timely fashion, there is no more convenient option.

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