What is a Credit Card Advance?
By Christopher Ronk

There are typically two types of credit card advances; one is for personal use and one is for business.

The personal type is generally in the form of a small cash amount ($100 to $1,000) and is typically paid back within a month along with interest and other fees. Another term for this type of cash advance is a payday loan.

The business credit card advance (sometimes called a business cash advance or a merchant loan) is quite different from the payday loan. It works like this;

• A merchant loan provider purchases a portion of your businesses future credit card sales at a discount based upon the amount of credit card sales your business does each month.
• They will then set up your processor to automatically use a percentage of your daily credit card sales to pay back the advance.
• Because they use a percentage of your daily sales; the payback amount differs from day to day. This is referred to as a flexible pay back schedule. This way you pay back less on slow days and more on busier days.
• The typical payback target is 6 to 9 months.Many businesses use this type of funding if they are unable to get a loan from the bank or they cannot wait the amount of time it usually takes for a bank loan to be processed.

Credit card advances are generally more expensive than bank loans but they also have many advantages. Some of these advantages include;

• You are typically funded within days instead of weeks or months.
• These are considered unsecured loans, no collateral is needed.
• Because they look at your credit card history as the basis for the advance, poor credit is ok.
• Because there is no UCC-1 filing, you can use a cash advance along with a bank loan.
• There are no restrictions on how you spend your money.

A business cash advance is not for everyone. A reputable provider will work with your business to come up with a solution that fits into your business model.

Make sure to ask lots of questions and be careful to understand everything you are signing. It could be one of the most important business decisions you make this year.