Simple cash funding, also referred to as cash loans or advances, enable a business to quickly and easily obtain the funds needed for financial emergencies. Traditional lenders, such as banks and credit unions, typically do not offer this type of funding; individuals must go to independent financial companies in order to obtain immediate cash. These funding resources are not meant to be long-term solutions for business expenses because they are short-term loans or advances that must be repaid within two weeks to thirty days, depending on the lender.
Simple cash loans are easy to obtain because the lenders who provide them generally accept high-risk individuals with poor credit histories. Because of this, these loans tend to have higher interest rates than traditional loans. Most cash lenders also do not require as much financial documentation as traditional lenders. Typical criteria includes applicants providing proof of steady income source, a valid bank account that allows direct deposits, and not having outstanding cash advances or loans. Applications only take a few minutes to complete and are available online or at the lender's place of business. Once submitted, the approval process can be as short as a few hours. Upon approval, the lender deposits the funds into the applicant's account.
Simple cash funding advances are a little different from cash loans. Instead of owing a debt to the lender, applicants use their next paycheck as collateral for the amount funded. The requirements and application process are usually the same as with cash loans. After approval, the lender gives the borrower the cash, and then withdraws that amount, plus any additional fees, from the borrower's account on a specified date.
People looking for working capital factor are usually referring to factoring, which allows a business to sell its accounts receivables at a discount to another company, called a factor, for immediate cash. Because a business's receivables account is considered an asset, it can be used to secure additional funding. The cash obtained from factoring is typically used as working capital, the money needed to operate a business on a daily basis.
Many financial institutions also act as factors. In order to qualify for factoring, a business must process credit cards and must have been doing so for specified length of time. Some factors may also require a business to process a certain amount of credit card orders per month to qualify. The approval process can take as little as one day. Once approved, the factor gives the business the funds and then collects the payments made to the accounts receivables until the funds are replenished. Some factors may only require to receive payments for a specified length of time, such as four months.
Working capital factoring is not considered a loan; it is merely the sell of a business's assets for cash. Because it is not a loan, it does not add debt to the business's balance sheet, and most factors require little or no financial documentation; the receivables secure the funding. The factor relies on the business's customers to repay the funds.