Working capital is like air for business. Without it, you won’t be able to inhale the opportunities and exhale the challenges. But as a smart entrepreneur, you understand that by cleverly utilizing an initial cash advance from your cash advance lender, you will then qualify for a re-advance, which will ensure a steady, ongoing cash flow that serves your business, long term.
So what’s the difference between a cash advance and a re-advance?
A cash advance is when a business qualifies for up to 100% of their monthly card turnover in the form of a working capital cash injection. Funds are then repaid as a small agreed-fixed percentage of all future card transactions until the amount is fully paid off.
A re-advance is when 70% of the above facility has been paid back. Then the business qualifies for a re-advance. This can happen even quicker than the initial cash advance as all the merchant’s details are already on file. All that is needed are a few updated statements and the additional funds will be made available. Plus, should the merchant have not taken the full amount you originally qualified for, they can also ‘top up’ the Merchant Capital cash advance at any point in your funding cycle. Says Ryan Cohen, Chief Partnerships Officer of leading cash advance lender Merchant Capital, “This is an extremely popular product as 80% of our customers re-advance with us, given the benefits of our unique working capital solution.”
How should my business use a re-advance?
As entrepreneurs ourselves, we understand that nobody understands your business like you do. So we never prescribe what our merchants use their funds for. That said, we always encourage funds to be used for growth enhancing opportunities. In other words the merchant should ask themselves, “Once spent, will these funds grow my business or have I simply used it to plug holes?” This choice is critical as it ensures that the initial use of funds generate steady sales that can then assist you in paying back your initial cash advance so you can then qualify for a re-advance.
A lesson from the pros
Owner of Fix Auto, Lebo Magwa, aspired to become the go-to service provider for insurance companies requiring small and quick panel beating repairs for her clients. But in order to do that, her business needed to buy expensive equipment to meet steep insurance company requirements. As an astute entrepreneur, Lebo knew this was a strategic way to grow her business so she used her Merchant Capital cash advance to fund this pivotal project and purchased this equipment the moment her cash advance was issued (within 48 hours). The decision totally paid off and shortly following her move, Lebo’s business qualified to become a key service provider to one of the biggest insurers in South Africa. Once Lebo had repaid 70% of her cash advance loan, she then qualified for a re-advance. Understanding how useful the first cash advance had been, Lebo jumped at the opportunity to take out a re-advance. This time she used the working capital from her re-advance to boost her cash flow for day to day business expenses. Today, business at Fix Auto is booming: Lebo employs 32 staff members, they have moved to bigger and better premises and are well on their way to establishing themselves as one of the biggest suppliers to insurance service providers in South Africa.
The bottom line
Building a business takes ambition, vision and backing that benefits you, not just your bottom line. With the right outlook and strategic thinking, you will be able to use your cash advance loan and subsequent re-advances to ensure your business has a steady flow of working capital that can truly serve your ambitious growth long term.
For more information on how we can serve your business’s ambitious growth long-term, CLICK HERE and get in touch by submitting the form on our "Contact Us" page.