How To Get Cash Fast

Today, we’re going to take a deeper dive into the subject of how to get cash quickly and share the fine print you need to know about hard money lenders, factoring and merchant cash advances.

If there’s one thing all loan sharks have in common, it’s this: they prey on people that really need cash. Posing as heroes upfront, they swoop in and make you think they can part the Red Sea. Up until payday anyhow—when you learn that money you got access to came at a steep price. A very steep price. 

If there’s one thing all hard money lenders, factors and merchant cash advance companies have in common, it’s the fact that they’ll give you quick cash, but it’s going to cost you a pretty sum.

The Facts On Hard Money Lenders

Typically, hard money lenders offer equity-based loans that are secured by the residential and commercial properties you own and used to finance new real estate acquisitions including rehabs, flips and more.  Traditionally sought-after by those that can’t qualify for bank loans and/or those in need of access to cash within just a few days, hard money lenders make qualifying fairly simple—often requiring no FICO scores, tax returns, or financials of any kind.

Sound too good to be true? Well, it kind of is. In exchange for providing you with a lump sum of cash fast, they’ll usually charge you extremely high-interest rates that are conducive to the amount of risk they undertake by funding your needs.  The loans will usually be short-term—often lasting even just a few months or years as opposed to a standard 15 or 30-year mortgage loan you might secure at your bank. Hard money loans are usually funded by small, private lenders. If you default on your loan, the lender will assume ownership of your secured property at a rate that is far lower than market value and you’ll be left to pick up the pieces with one less property in your portfolio.

The Facts On Factoring

Another way to access quick cash is to factor your open invoices. It works like this:

– You provide a service for your customer

– You create an invoice for that service and send the invoice to a factoring company

– They pay you a cash advance on the invoice amount (typically within 24 hours)

– The factoring company collects full payment on the invoice

– They pay you the rest of the invoice amount minus their fee

Factoring is NOT a loan. No debt is incurred when you factor. It does not require collateral. And the funds are unrestricted—which basically means you get to spend your money however you like without a lender breathing down your back and dictating which allocations are allowed and which aren’t. The flexibility is appealing to many small business owners and so is the fact that when you get a factor it:

– is based on your customers’ credit and payment history, not yours

– provides a line of credit based on your sales rather than your company’s net worth

– usually has no limit to how much you can finance

– can be great for new startups that lack the credit history needed to secure approval from a

more traditional source

– puts an end to the cash flow crunch that many small businesses encounter when waiting

30, 60 or 90+ days to be paid

The not so pretty part of factoring comes in the form of the fee they charge to do it. Factoring fees range from 2-15%.  And that can really add up.  Also, if you don’t have sizable invoices, most factors simply won’t see enough value in the transaction to get involved. In many cases, this automatically excludes B2C businesses. Sometimes factors will contact your customers directly and that’s not always a good business move on your part. It’s even worse if your customers don’t pay the factor because most factors have no problem whatsoever sending collection agents after the customers you work so hard to get. That’s not exactly going to encourage customer loyalty.

The Facts On Merchant Cash Advances

If you’re operating a business in the B2C world and you felt left out when you read about factoring options, fear not. Merchant cash advances may be just what you’re looking for.  Here’s how they work:

– You establish a sales history and make projections regarding future credit/debit card income

– The company you secure the advance with gives you a lump sum of cash upfront

– Over the course of a short term (usually 6 months – 2 years), the company that funds the

advance collects a portion of your daily credit card transactions until the advance and the

fee for the advance is paid off.

The good part? B2C merchants can get cash fast, often in as little as 48 hours with a merchant cash advance. The bad part? It’s not uncommon for merchant cash advance companies to take 10-25% of your daily credit card transactions, until the advance and the fee that accompanies it is paid off. Plus, they get paid first—meaning you don’t get to touch your cash each day until the merchant cash advance company gets theirs.

When it all comes down to it, bank loans are usually the least expensive route to capital, but their terms can be tough and their turnaround time can seem really excessive compared to a different option that will provide funding in as little as 24-48 hours. Like everything else in business, you have to weigh the pros and cons of your specific situation and then move forward based on what option makes the most sense given your unique scenario.

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