Outlining the Costs of Business Cash Advances

Business cash advances should only be considered in the case of an emergency financing need. The cost of a cash advance typically exceeds the cost of other funding, and this can result in paying too much for the simple loan. You may even find that cash advances have very rigid financing regulations that make them difficult to pay off without additional penalties.

High Risk Loan Costs

A cash advance is by definition a high risk loan. A cash advance is rarely secured against an asset, and most cash advance lenders do not have high credit standards. They offer immediate financing solutions to business owners who may not qualify for standard business credit cards and other options. Because these lenders know the business owners have few other options, they are less likely to be willing to negotiate and more likely to offer a hard line cost. Without the ability to negotiate, you will have to take the lender's offer or walk away and risk losing the option of financing.

High Origination Fees

Most businesses taking advantage of cash advance options need the funding fast. You either have a purchase you need to make, a bill you need to pay or need assistance getting over a slow period of business. In any case, you do not have the luxury to shop around for a permanent financing solution. Lenders know this, and cash advance lenders will charge you more to expedite the loan process. These fees may come by many different names or in different sizes, but you will find the origination fees on a cash advance far higher than those on a standard, secured loan option.

Payment Due in Full

A cash advance is not likely to have an installment payment schedule. Instead, these loans often come due in full at the date of maturity. This means you will have to repay the entire sum of the loan in order to avoid any additional fees with the financing. All borrowers have intentions of paying off a loan. However, when there is no flexibility on the repayment, it is harder to make this a reality. You may find you are in a challenging situation where you have to elect to repay the loan or lay of an employee, for example. Traditional bank loans will have more flexibility than most cash advance lenders will offer.

Hidden Fees

You may not be aware of all of the fees you will owe on a cash advance loan if you are not careful. By law, the lender must disclose these fees up front, However, they are often disclosed in fine print or at a point when you do not have time to carefully ask questions. Cash advance lenders may charge extremely high penalties for missing your payment by even one day. They may require only cash, check or money order and prevent you from paying the loan back with a credit card. All of these things can result in added expense you did not plan for when you took the loan.