A revolving line of credit works a little differently from a traditional business loan.  When the bank approves your business for a line of credit, they’re basically committing to lend you up to a certain dollar amount at any given time.  You don’t, however, have to draw down the whole line of credit all at once.  You get the benefit of only paying interest on the money you need.  It’s good because once it’s there, you know you’ll have access to capital whenever you need it.  Additionally, every dollar of principal you pay down makes a dollar available to you at some point in the future.  It’s similar to a credit card.

What do you do when you’ve maxed out your line of credit?  Chances are, the bank isn’t going to be willing to extend your maximum.  Many business owners turn to a business cash advance in this situation.  Business cash advance providers look at a completely untapped asset:  your future credit card revenue.  Business cash advance providers purchase those future sales at a discount.  It’s paid back by assigning a small fixed percentage of every credit card transaction towards the balance on the advance.  Some cash advance providers allow you to use this tool similarly to a business line of credit.  You don’t have to pay off your whole balance in order to qualify for additional funds.  You can usually draw down again once you’ve paid in just 30 – 40% of your balance.

The other advantage of this type of financing is that it’s not reported to the credit bureaus.  It won’t affect your debt to income ratio and if you decide to apply for a business loan or a line of credit, the bank won’t see the business cash advance listed on your credit reports.