What Are Cash Advance Loans?



What Are Cash Advance Loans?

When it comes to making your small business grow and prosper, having access to the right financing opportunities is essential. Unfortunately, though, FinRegLab.org has recently published statistics highlighting the difficulties faced by small businesses when looking for loans.

As such, today we’ll be looking at what cash advance loans are, why they are generally not a great option for a small business to take out for loan needs, and why you should always make sure you’re choosing who to loan from carefully for the success of your small business!

What Are Cash Advance Loans?

First of all, we need to clarify what cash advance loans actually are. Cash advances are services that many lenders and banks provide for loaning money to small businesses and individuals alike. A cash advance is actually a form of short-term loan that’s provided by your small business’ bank or credit card company.

Many people end up taking out cash advance loans because they are so quick and easy to approve. Some loans take a considerable amount of time to get approved. This is before even considering how long it will take for the money to arrive in your account. However, a cash advance loan is a rapid transaction. As a result of this, the loan will be approved (or rejected) quickly. Following this, the money will appear in your bank account very some after this.

Of course, many people find this to be very advantageous. However, cash advance loans aren’t the all-in-one solution that many people believe them to be, and they can actually be quite dangerous to get involved with if you’re not careful. This is because cash advance loans can have incredibly high interest rates. Because of this, you’ll end up paying considerably more on the loan than you may have otherwise.

It’s worth noting that a credit score won’t be directly affected if you take out a cash advance loan. That’s not to say this will have no effect at all, though. A cash advance loan will still impact your credit utilization score and your outstanding balance, so you may find that the credit score falls slightly following taking out a cash advance loan.

Types of Cash Advances

There are many different types of cash advances that you should be aware of. Credit obtained through a credit score is the most widely used and known cash advance. On most credit options, that amount you’ll need to pay as interest will be in the region of 24%, which is substantially higher than most APR for purchased goods.

Merchant cash advances are specialist cash advantage solutions tailored for companies and businesses.

Payday loans are also considered a form of a cash advance, although these are arguably among the most damaging. A payday loan can have exorbitant fees attached to it – often in the region of 100% interest rates or higher! As such, your small business should always try to avoid these types of cash advances at all costs. After all, the repayment on them is, often, unsustainable.

When You Shouldn’t Take Out Cash Advance Loans

Only fifteen years ago, the trading environment for businesses was very different from how it is today. Back then, firms were minimal for where they could get credit – but things are much easier now! However, there are still a few times when your small business should strive to avoid taking out a cash advance loan.

The most obvious of these is just before filing bankruptcy. Many firms wonder, what have they got to lose? However, if you are operating as a sole trader, bankruptcy may not automatically write off your business’ new debts. So, you should never take out a cash advance loan as a “last resort.”

Also, always make sure you can afford the loan before you take it out. Otherwise, even if your business is running successfully, you might find yourself under challenging conditions that you’re unable to pay back.

Top Tips for Taking Out a Loan

If your small business needs to take out a loan, you may want to consider the following top tips. Your business will stand the best chance of getting a favorable and fair loan offer by following our tips.

  • Don’t just settle for monthly or bi-monthly payments, as these are often not viable loan options. Shop around and ask if there are any other loans with varying payment durations!
  • Daily and weekly payments may give you many options to pursue!
  • Quotes are neither an approval nor an offer for your loan request; therefore, you shouldn’t count on a loan just because you’ve had a quote, as a lender may not necessarily lend to you!
  • The loan isn’t funded until you receive the cash in your business bank account! Always check that your lender has paid before accepting anything, and chase them up if the money doesn’t appear rapidly within your bank account.


At the end of the day, the blame for poor lending invariably falls on the shoulders of unscrupulous lenders who don’t offer a fair rate for your small business. As such, if you need a loan, you should make sure you choose a lender who will help to support you rather than just use you as a means to make money from interest!

Enter our team. We work a little differently from most lenders. We pride ourselves on helping our clients with their cash flow needs; we offer a wide range of different loan solutions, but we’ve also made it our goal to help clients protect their future cash flow cycle too.

We work with clients to help them learn when and how to borrow effectively for their business’s benefit. We also provide coaching and support for when to conserve funds and scale back, so our clients have the best chance of building a successful business venture.

Don’t delay! If your small business needs a loan to help progress, our team is here for you. We can help you find the ideal solutions for your needs. We’ll help you develop a strong cash flow forecast and perfect your business’ financial management, so you can look to the future with confidence!