Why cash advance matters to a first-time founder
A cash advance can cover an urgent gap, but it is often among the most expensive ways to borrow. Fees may be charged immediately, interest may start on day one and merchant advances may take a share of daily sales. That can deepen the cash shortage the founder meant to solve.
Examples of cash advance
A founder takes a ₹500,000 advance with a ₹25,000 fee and 24% yearly interest. Ignoring compounding, thirty days of interest is about ₹9,900: ₹500,000 × 24% × 30 ÷ 365. Repaying after thirty days therefore costs roughly ₹534,900, before any other card or lender charges.
Common misunderstanding
It is not free access to money already available on a credit limit. It is debt, priced differently from ordinary card purchases. A merchant cash advance may legally be structured as a sale of future receivables rather than a loan, but the founder should still compare its total repayment with the cash received.
When to use it
Use one only for a genuine, brief timing gap with a certain repayment source, after comparing an overdraft, invoice collection and supplier terms. Avoid using advances to fund recurring losses, payroll without a recovery plan or speculative spending. Read the fee, interest and repayment terms before accepting any money.