Whether you need money to buy new equipment or to increase your inventory, the old saying “you have to spend money to make money” applies. For businesses seeking capital, there are many options, from traditional small business loans to increasingly popular cash advances in Singapore.

A cash shot is a way to get money from your available credit, but it is not always the best idea. Withdrawing a cash deposit from your credit card is risky, expensive, and carries the possibility of debt if you do not pay it quickly. Knowing that before you swipe your credit card at the ATM can help you make better decisions about how to use a prepaid card – if you use one at all.

What is a cash advance in Singapore?

A cash advance is a form of financing in which a credit card processor or third-party lender “advances” money to you based on your credit card sales volume.

Basically, the loan company is buying a portion of your future credit card sales. Instead of a traditional loan with a monthly payment, you will pay the advance through an automatic deduction from your daily credit card sales.

Eligibility

Cash advances in Singapore almost always have more flexible eligibility requirements than traditional business loans.

Notably, you don’t necessarily need good credit. One of the main factors in determining whether an advance will be approved is strong credit card sales. If you can show that your business processes a lot of card transactions, you have a better chance of a successful application.

Features vary by a moneylender, but in general, you can qualify if:

  • Has been in business for at least one year
  • Currently accepts credit cards and processes at least a few thousand dollars per month
  • Look for at least S$ 10,000 in funding

Some cash advance companies may have additional requirements, including a minimum threshold for credit card sales per month, but these criteria give you a starting point in understanding the probability of getting an advance.

Amounts and uses

Cash advances in Singapore are available in amounts from S$ 5,000 to S$ 150,000 or more. The more money you seek, the more important it is to show high volumes of credit card sales.

Cash advances can be used for almost any legitimate business purpose, including purchasing equipment or inventory, remodeling, advertising, personal training, and more.

Differences between advances and loans

Cash advances in Singapore are different from small business loans in several ways, but one of the most important is that you pay automatically through a fixed percentage of your credit card sales. Instead of sending a loan payment once a month, a percentage of your credit card sales will be deducted daily until the advance is paid.

The good thing about a system like that is the days when you have a lower sales credit card, your payment is lower as well. You won’t have to find money to meet a predetermined payment amount, which can be a relief for businesses that are short on money.

The downside is that not having a predetermined payment amount can make budgeting difficult. precisely. Also, because you have no control over repayment, you don’t have the ability to pay less in “interest” by making additional payments as you do with loans.

Note that cash advances are technically “interest-free.” since the benefit to the lender is calculated as a fixed fee; however, for the purposes of contrasting with loans, we refer to this as interest. The fee cannot be reduced, unlike the interest on a loan.

Loans are carefully regulated in Singapore. Cash advances are not loans and therefore are not subject to the same regulations. In general, cash advances can cost you more in “interest” than a traditional loan, in part because they are considered a higher risk to the lender.

When not to take a cash advance

Just because you may be eligible for a cash advance in Singapore does not necessarily mean that you should accept it. Borrowing money is always a calculated risk, and the warnings for loans are similar to cash advances.

You may want to consider other sources of financing if you are already in debt, experiencing a drop in sales (in particular, crashes that come out of the ordinary or that don’t follow typical sales history), or you are eligible for a better loan. terms and interest rates.

Even though you don’t have a monthly payment, cash advances are still debts, and they will require a portion of your business income to pay. If you’re already struggling to cover your expenses, adding other debt can only make the problem worse.

On the other hand, if you are in good financial shape but looking to expand or grow, but cannot qualify. For a traditional loan, a cash advance can be a good financial bridge. However, if you are eligible for a small business loan, it is generally in your best interest to take that route.

How to get a cash advance from the money lender

Once you’ve considered your financing options, you may decide that a cash advance is a route you want to take. The steps to take to obtain a cash advance may vary depending on the company you choose. You can apply for cash advances through many credit card processing companies, or you can apply with a licensed money lender like Tradition Credit Co Pte Ltd.

Follow these four steps to request a cash advance:

  • Contact your credit card processor or licensed money lender like Tradition Credit Co Pte Ltd.
  • Complete a business cash advance application: Be prepared to provide any necessary supporting documentation, such as processing statements.
  • Review the cash advance offer carefully: Check the percentage of sales that will be withdrawn and estimate approximately how long it will take to pay the advance.
  • Sign the documentation to accept the advance: Be sure to keep a copy of all documentation for your records.

Some companies also provide the option of requesting a cash advance from their dashboard or report panel (where you will see information about your transactions). In some cases, you will only see the option if you are eligible. Check with your panel of merchants, but don’t assume there’s no option that you can’t get a cash advance from another source.

Other considerations

Some companies consider taking a cash advance to be lighter than a loan because it seems more informal.

Cash advances are a legal obligation and it is important to remember that even if the business is closed, you may still be responsible for paying the advance. Always be sure and read any cash advance contract before signing, and consult a licensed attorney if you have any questions.