What is a Loan Advance?

What is a Loan Advance?

Loan advances are part of a new wave of flexible, business-friendly cash flow solutions which enable businesses, particularly SMEs, to access unsecured cash quickly and easily and to pay it back at a pace they can afford, often related to the performance of their business.

But what is a loan advance, and how do they work?

A loan advance is another name for what is commonly termed a merchant cash advance. Although it has some of the features of a standard loan, notably a contractual agreement, it has all of the benefits associated with an advance. That is, it is unsecured (so borrowers’ assets are not at risk), it is a short-term commitment (usually paid back within a year), there is no interest (a price is agreed for the cash advanced) and the cost of the advance is 100% tax-deductible.

What is a loan advance for?

In short, a loan advance is for anything a business owner needs it for! For example, you might have your eye on an efficient piece of equipment that will really ramp up your productivity over the busy season, but simply don’t yet have the cash flow to afford it. Or you might be worried that the state of your decor might be turning customers away, yet you can’t afford to do anything about it until business picks up a little – a classic Catch 22 situation.

Here is where a merchant cash advance comes in. Whereas a traditional lender will often lock you into a long-term loan and secure it on your assets, a loan advance company, such as Speed Fund LLC, will quickly assess your eligibility, deliver the unsecured cash and agree on a price that suits you.

Loan advances can also be a vital credit source for developing business without much of a credit history behind them. This is because loan advance companies like Speed Fund LLC are only interested in a business’s current and future performance; the past is irrelevant.

Which businesses are eligible and how is a merchant cash advance repaid?

Eligibility and repayment are tied together in a loan advance. To qualify, a business will normally have to be turning over a defined minimum amount (for Speed Fund LLC that is just $6,000 per month), and be using a credit/debit card terminal to take customer payments. This turnover will also form the basis of the repayment schedule (although Speed Fund LLC offer extra flexibility by including a fixed repayment option).

In most cases, repayment of the advance, and the agreed fee, will be taken as a percentage of each credit card and debit card sale. So, in the first example above where new equipment is needed for the busy season, the initial repayments would be high but would then tail off as the season slows down. In a traditional loan, the business owner would be stuck paying a fixed interest rate which may cause cash flow problems if business is slower than expected or an unforeseen incident occurs.

Unbeatable Flexibility from Speed Fund LLC

When it comes to loan advances, Speed Fund LLC offers their clients the best of both worlds. Those who prefer the security of knowing that their repayments are tightly bound to their business performance, and are happy to take that little bit longer to pay off their advance, can go down that route. But for those who are in a position to commit to fixed repayments and want to settle their advance quickly, that can be an option too. This is not the case with many loan advance companies and it is this flexibility which marks Speed Fund LLC out as among the industry leaders in this new area of business-friendly credit.

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