A lot of money is spent advertising different types of cash advance loans. Many lenders have found them to be highly effective at generating a return on their investment because of the type of service being provided. In the simplest terms a cash advance loan is an up-front payment made towards a business or individual based on their future earnings.
Cash advance loans are often taken out for a wide variety of reasons:
From time to time one may find their self in a situation where they are unable to pay for a crucial bill or that bill may put them in the situation where they can afford food or other goods. A cash advance loan can be a temporary solution in which a long-term solution has already been determined but the cash advance loan is required for the short-term. In these cases, the cash advance loan could be the size of the entirety of a pay check minus the fee paid to the lender or it could be a portion of the paycheck with an additional portion being promised to the lender. These are also known as payday cash advance loans.
Some parents may decide to take a payday cash advance loan as a means of being able to afford additional gifts and festivities during the holiday season. While it causes difficulties for the following months, some take out the loan in order to have an influx of cash in order to purchase more expensive gifts.
In a similar spirit there are businesses that rely on merchant cash advance loans as a means of being able to purchase additional goods and services during busy times of the year. While the business may be able to afford their goods during normal times of the year, it could be financial advantageous for retail businesses and restaurants to have extra capital available during the busiest part of the year. These types of arrangements are generally made against future credit card sales, thus reducing the risk compared to a standard business loan. The company producing the loan has a clear track record of the company’s past credit card sales and can therefore make a solid judgment about lending money to the business.
Businesses with bad credit often turn to merchant cash advance services when traditional lending is not an available option. While a merchant cash advance may potentially cost more than a traditional loan, merchant cash advance companies are more willing to lend the amount to businesses where they can see an obvious ability to earn back the amount being given. Some businesses, especially businesses in high risk industries, often do not have a choice when it comes to methods of obtaining additional capital.