What to try before taking a cash advance

An advance is usually taken because it is fast, not because it was chosen. Here are the alternatives, ordered roughly by how quickly each can actually put money in your account.

1. Money you already have access to

An undrawn line of credit. Available today, no application, and this is precisely the situation it exists for. Owners sometimes forget they hold one, or feel reluctant to use it, which is an odd instinct given that is its entire purpose.

2. Collect what you are owed

Unglamorous and frequently the fastest money available. Run your receivables ageing. Call the oldest overdue accounts today. Offer a small early-settlement discount if it helps — a couple of percent to be paid this week is enormously cheaper than an advance.

Businesses in a cash crisis surprisingly often have significant sums sitting uncollected because nobody has made the calls.

3. Supplier terms

Ask your main suppliers for extended terms for one cycle. An established customer asking for sixty days instead of thirty, once, with an explanation, is a conversation that usually goes better than expected. Suppliers would rather extend than lose you.

Free, immediate, and almost nobody asks.

4. Equipment financing, if the need is an asset

If what you actually need is a machine, a truck or a trailer, finance it against itself. Approval standards are more forgiving because the asset secures it, and a straightforward dealer purchase with clean paperwork can fund in days — comparable speed to an advance at a fraction of the cost.

5. Invoice factoring, if you bill commercial customers

Funded against invoices you have already earned, underwritten largely on your customers rather than on you. It can start quickly, and while it is expensive compared with bank credit it is materially cheaper than an advance.

For a Jerome carrier or a Nampa supplier, this is usually the right comparison rather than an advance.

6. Your existing bank

Worth a call even if you assume the answer is no. Banks are slower, and an existing relationship with visible deposit history sometimes moves faster than you would expect. A short-term facility or a temporary overdraft arrangement costs a fraction of an advance.

7. A short-term loan from a non-bank lender

Between bank credit and an advance sits a tier of online and non-bank term lenders. More expensive than a bank, considerably cheaper than an advance, and often able to fund within days. For many businesses facing an urgent need this is the product they should have been offered.

And afterwards

Whatever gets you through this week, arrange a line of credit in a strong month afterwards. The reason an advance looked like the only option is almost always that nothing was in place beforehand — and the cost of fixing that, in a good month, is close to nothing.