How to Choose a Cash Advance Provider
Taking the time to choose the right business cash advance provider can be tough–especially if your business needs cash immediately. Don’t make the mistake of rushing into a cash advance transaction with the first company you’re approved by–shopping around can give you bargaining power and allow you to compare rates, fees and terms.
Where to Look for Providers
You can turn to a large company or a small business to obtain cash advance or factoring services. A good place to begin your search is with businesses you already work with–your current credit card processor or bank, for example, might offer a cash advance or factoring service in addition to providing business loans or merchant account services. You’ll usually be able to negotiate a better rate with a business you already work with or a company that is already familiar with your business history. Online searches can also yield numerous results. If you’re not familiar with a particular company, make sure you ask for references, and contact current and past customers before signing a service agreement.
Make sure you compare providers that have worked with businesses in your industry and have served companies similar to yours in size. In some industries, statutory regulations or state and local laws can restrict factoring or cash advance transactions (think law firms, medical billing companies, etc.). If your business accepts customer retainer payments for future services, you may be restricted in how you can use a cash advance transaction. Choosing a company with industry experience ensures you comply with applicable rules and standards.
Your relationship with the provider doesn’t end after your application is approved. You’ll also be communicating regularly during the repayment process. Make sure you choose a provider that is accessible, able to negotiate new terms if necessary and assist you during the process of obtaining an advance. Reputable providers thoroughly explain the application and repayment process, help you set up your credit card processing system for repayment and are available to answer any questions during the cash advance repayment process.
Make sure the provider is concerned with what is best for your business. Stay away from companies that try to steer you toward a too-high advance amount or those that propose unrealistic repayment terms. Processing or administrative fees are not generally attached to merchant advances–you should be skeptical of any provider who attempts to charge such amounts. Providers also should not require that you use their company for merchant processing or other services.
No matter which type of provider you choose, make sure you evaluate all of your options before making a decision. Comparing rates and terms from several different providers is the best way to determine if you are getting the best deal available for your business.
Have a question about cash advance providers? Connect with a SCORE mentor online or in your community today!