Business owners in general and small business owners in particular may be all too familiar with bank business loans, but many are not aware of the potential that a business cash advance offers. This is an alternative course of action for merchants in need of quick, immediate funding. This is an attractive option for business owners whose finances are on the brink of disaster. A lot of times these companies are in no condition to go through the lengthy and uncertain maze of bank-funded business loans and need a faster solution.

Cash advances are perfect for this need. They can be processed as quickly as seven days from the time you apply and, other than their notorious interest rates, there are no strings attached. Unlike with bank loans, when you take out a business cash advance you will not be required to put up collateral or show your credit history, which for many near-bankrupt business owners is not an attractive prospect anyhow.

The bank would also require you to subject your business and your records to intense scrutiny, which is not only time-consuming but also a pain. With cash advances you can bypass all of this red tape and get to what really matters: keeping your business afloat. If you make sure to thoroughly research the details and specifics of your cash advance, and if you feel that there is no other option for your company, a business cash advance could be right for you.

Most cash advances work on a credit card basis; in other words the cash advance company will assess your business’s revenue flow from credit card purchases and offer you a proportionate sum of money. Since the industry is relatively young (cash advances have only been around for about a decade) there is no strict industry-wide regulation as of yet. Interest rates can fluctuate wildly but are usually based on the merchant’s profit margin as it relates to credit card transactions, so it should be manageable. This is due to the fact that almost every business cash advance company gets repaid by taking a certain percentage out of each credit card transaction made in your store.

Cash advance companies like to avoid the “loan” label, but they are at least very closely related to loans. They are simply administered in a different way and usually involve less difficulty in exchange for a higher interest payment. It helps to compare them to a 30-year mortgage that you might take out on a house: the lump sum is quite large, but the payments are designed to be smaller and more long-term.

The key difference with your typical business cash advance is that there is no fixed interest rate, even when speaking in terms of individual advances. The company that you deal with will simply assess your average revenue flow and subtract accordingly, meaning that your payments will fluctuate from one moment to the next. In this sense it can feel a bit like having your wages garnered.

Because of this high interest rate and the fluidity of the industry standards, it’s imperative to do your homework as much as possible and choose a good, trustworthy company as you prepare to take out your advance. While there are many perfectly reasonable business cash advance companies out there, it is equally true that some cash advance companies have ruined the industry name with irresponsible practices. Try to get customer reviews if at all possible—some companies will provide testimonials or contact with former consumers if you ask for it. This can go a long way toward building your confidence in the company you deal with.

But most of all, be judicious in your use of this emergency measure. Because the fact of the matter is that not every financial problem that a company may have constitutes good cause for taking out something as long-term as a business cash advance. You will be paying off small amounts of debt for a very long time. Most business owners are lucky to get a 30% APR and they can run the gamut from 60% to as high as 200% in some cases. So, use this option for worst-case scenarios. If your company won’t profit dramatically or be saved from absolute bankruptcy because you took out a business cash advance, then doing so may not be right for you.

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