Did you know that a commission advance can actually help you improve your credit score?
While trying to balance their cash flow, many agents first consider the use of debt such as credit cards, business lines of credit, and home equity loans to get the cash they need to run their businesses. However, too much debt can hurt your credit score.
What savvy agents are turning to more and more is balancing their cash flow needs with a commission advance. A commission advance is not a loan, but a way to pull forward earnings that have not yet been turned into cash in order to stay current on financial obligations. Your credit score will be aided not only by reduced borrowing, but also by helping you stay current on business expenses. This “off balance sheet” type of transaction is a great way to improve your debt/equity ratio.
Another great feature of a commission advance versus using debt is that commission advances force financial discipline. Commission advances are settled at the time of the real estate closing, so that repayment is completed promptly. Most types of debt, on the other hand, is easily put off until sometime in the future. Sadly, too many agents never get around to paying off their debt as it builds, or paying it on time, again, hurting their credit score.
A commission advance can and should be used as a short-term solution for a short-term need in order to bridge the gap in between your real estate closings. Real estate agents that use commission advances properly can balance out their 100% commission income and avoid the “peaks and valleys” of the real estate market.