LG Funding Cash Advance[yoast-breadcrumb]
Do you need cash quickly for your business? LG Funding offers merchant cash advances that can get you the funds you need in as little as 24 hours. As a consulting firm dedicated to helping businesses solve challenges, we want to provide an overview of LG Funding and merchant cash advances so you can make an informed decision.
What is a Merchant Cash Advance?
A merchant cash advance (MCA) is a form of business financing where a company like LG Funding provides you with a lump sum of cash in exchange for a percentage of your future credit card and debit card sales. It’s not technically a loan, but rather the purchase of your future receivables at a discount.Here’s how it works:
- You apply for a merchant cash advance with LG Funding and get approved for a certain amount, let’s say $50,000.
- LG Funding provides you with the $50,000 upfront, which you can use for any business purpose like marketing, inventory, payroll, etc.
- In exchange, you agree to pay back LG Funding a fixed percentage of your daily credit/debit card sales until the full $50,000 is repaid plus a fee, which is typically around 1.1-1.4 times the amount advanced.
- LG Funding recoups its money by taking a fixed percentage of your daily card sales – typically 5-20% – via split payments from your credit card processor.
- There is no fixed repayment schedule – the payback fluctuates based on your sales volumes. In months where your sales are higher, more money goes to repay the MCA. In slower months, less money goes to the payback.
- Once the full $50,000 plus fee is repaid, the agreement ends and you regain 100% of your card sales revenue.
The advantages of an MCA over a small business loan include:
- Faster approval and funding – you can get approved and funded in as little as 24 hours
- Flexible payback based on card sales means repayment rises and falls with your revenues
- No collateral required – MCAs are unsecured
- Funds can be used for any business purpose
The downsides include:
- Higher cost – MCA fees range from 1.1-1.4X the amount advanced, so you end up repaying more than you received
- Daily repayments can significantly reduce cash flow until the MCA is repaid
- MCA repayments take priority over other expenses – you have to pay the MCA first before anything else
- If your card sales drop significantly, it may take longer to pay back the MCA
Overall, an MCA provides fast access to capital that can be used to grow your small business, but it comes at a higher cost than traditional financing options. It’s best for companies with steady cash flow that need funds quickly and won’t be overly burdened by the daily repayments.
What to Know About LG Funding
LG Funding is a direct lender that provides merchant cash advances ranging from $5,000 up to $500,000. They market themselves as a fast and easy way for small businesses to access capital.Here are some key things to understand about LG Funding before applying:
- Speed – LG Funding promotes that they can get you funds in as little as 24 hours after approval. This fast financing can help if you have an urgent need.
- High Approval Rate – LG Funding claims to approve 9 out of 10 merchants who apply. They focus more on your card sales history rather than your business credit score when approving applications.
- Transparency – Their website provides more info upfront about rates and fees than some competitors. Expect to pay a factor rate of 1.1 to 1.4X the amount advanced.
- Customer Support – Their application process is completely online with customer support available by phone and email. You can get questions answered quickly.
- Flexibility – After approval, you have 12 months to decide when you want the funds sent to your business checking account. There’s flexibility on when you draw down the funds.
- No Prepayment Penalties – LG Funding does not charge you a penalty if you are able to pay off the MCA early. Some lenders charge fees for early payoff.
- Repeat Customer Discounts – If you pay off your first MCA and apply for another, LG Funding may offer a lower rate on subsequent cash advances.
As with any lender, be sure to read the fine print carefully and understand the full cost before signing. But LG Funding can be an option for quick, short-term working capital.
The MCA Application Process
Applying for an MCA from LG Funding involves just a few simple steps:
1. Submit Online ApplicationYou fill out a short online application with basic details about your business and the amount you need. Approval is based primarily on your credit/debit card sales history.
2. Review MCA AgreementIf approved, LG Funding will email you an agreement spelling out the advance amount, factor rate, payback terms, fees, etc. Read this carefully before signing.
3. Sign Agreement & Give Banking InfoTo move forward, you’ll sign the MCA agreement electronically and provide checking account info where the funds should be deposited.
4. Funds Deposited in ~24 HoursOnce signed, LG Funding can deposit the lump sum amount directly into your business bank account as soon as the next business day.
5. Daily Repayments BeginYour credit card processor will start splitting your daily card sales and sending a percentage to LG Funding until the MCA is fully repaid.It’s a fast and convenient process that can provide you access to capital when you need it for an upcoming project or expense. The funds are unrestricted and can be used for any business purpose.
What Happens if You Default on an MCA?
Failing to repay an MCA as agreed can result in consequences:
- Late fees and higher interest rates may be imposed, increasing your total cost
- LG Funding can take collection actions like sending the unpaid balance to collections agency
- Non-payment could hurt your personal credit score if you personally guaranteed the MCA
- Legal action may be taken if you continue to default – LG Funding may sue for breach of contract
If you start struggling to make the daily payments, communicate with LG Funding immediately to discuss options. Be proactive, as defaulting can spiral into larger issues that hurt your business and personal finances.Some steps that can help avoid defaulting include:
- Build a cash buffer before taking an MCA to cover repayment obligations
- Only take what you can conservatively afford to payback based on projections
- Cut expenses in other areas to free up cash flow for MCA payments
- Try renegotiating your agreement if sales drop significantly
- If necessary, consider business credit cards, lines of credit, or bridge loans to help repay the MCA
With proactive planning and open communication, you can avoid the major risks of not repaying an MCA. Don’t take on more than your business can handle.