Merchant Cash Advance Blog

"U.S. Banks Rolling in Money," Says F.T.

noreply@blogger.com (Peter Andrew) — Tue, 19 Jan 2010 08:20:00 +0000

Small Business Loans Refused
Even as banks routinely turn down commercial loans to viable, and creditworthy small businesses, bankers are awash in a sea of money. According to yesterday's Financial Times:

As of November, cash assets in the US banking system had more than tripled since before Lehman Brothers’ failure, accelerating to more than $1,200bn. Meanwhile, loans books have shrunk... Favorable markets mean companies have also raised money and then parked it at the bank. Cash now comprises more than 10 per cent of total banking assets, its highest for almost three decades.

So banks have $1.2 trillion sitting there doing nothing while every day they refuse countless small business loans to established customers who are good risks. No wonder more, and more entrepreneurs are turning to merchant cash advances for their business funding.

Merchant Funding and the Government
Why isn't the government doing more to force banks--especially those that took tax dollars in bailouts--to make the small business loans that the economy so desperately needs? Is Wall Street's lobby so powerful that legislators are scared to take them on?

It certainly isn't a question of politicians, and regulators failing to recognize the problem. As recently as November 30, 2009, Jon D. Greenlee, who is associate director of the Federal Reserve's Division of Banking Supervision and Regulation, gave testimony about small business loans before the House subcommittee on oversight and investigations. He said:

Small businesses, which tend to have less financial flexibility in a recessionary environment, have been particularly affected during this cycle. Of note, small businesses rely on banks for 90 percent of their financing needs, compared to large businesses, which use banks for only 30 percent of their financing. There are more than 27 million small businesses nationally that employ about half of the nation's private-sector workforce and these businesses have approximately $1 trillion in debt outstanding. Access to credit markets is expected to remain a challenge for these firms, but at the same time, with inventory and capital spending levels at near historic lows, the demand for credit has remained weak.

Business Funding Demand Weak?
Mr. Greenlee was doing very well, right up until those last few words. Is it really true that "the demand for credit has remained weak"? Or is it that banks have been failing to meet that demand?

Maybe Mr. Greenlee has data to back up his assertion. But out here--beyond the Beltway, at the sharp end of the real world (does the real world have a sharp end?)--it feels as if the latter is more likely.

Merchant Funding Is Critical
Certainly, way too many small businesses are being forced to forgo opportunities to expand. Or are unable to cover emergency expenses, such as the repair or replacement of broken, and outdated equipment. Or are struggling to keep on top of short-term cash flow crises.

If you're in any of those positions--or need business funding for any reason--and have been turned down by your bank, then check out the opportunities offered by merchant cash advances here.

Need a Merchant Cash Advance? You're Not Alone

noreply@blogger.com (Peter Andrew) — Wed, 13 Jan 2010 09:00:00 +0000

Merchant Cash Advance--A Growing Need
If you're considering taking out a merchant cash advance (and why on earth are you reading this blog if you aren't?), then the chances are either that you've been turned down by your bank, or that you didn't bother applying because you knew that you'd be turned down.

And that's frustrating. Because, according to a December report from Experian, a company that provides credit references, small businesses are currently the best credit risks. In fact--although it's not quite a straight line progression--as a general rule, the smaller the business the better the risk.

Small Business Loans Are Low Risk
The report shows that, during November 2009, the average risk score for small businesses with fewer than 20 employees was 59.53, which makes them the most creditworthy of all groups. By contrast, companies with 1,000 employees or more scored a scary 34.14.

And of all the dollars owed by those small businesses just 15 percent were overdue. That compares with 23 percent for enterprises with 1,000+ employees.

What's the Problem?
The trouble is, banks are hoarding their (or, arguably, our) money, and refusing commercial loans to small businesses. The government recognizes the problem, but seems powerless to act. Last March, Timothy Geithner, Secretary of the Treasury, said in a speech:

Across this country, tens of thousands of small business owners are finding it harder to get the credit necessary to stay in business. Credit is essential to economic recovery, and we need our nation’s banks to go the extra mile in keeping credit lines in place on reasonable terms for viable businesses.
The government of the United States has put in place extraordinary protections for the banking system, so that banks can continue to benefit from low costs funds, and so that they have access to the liquidity they need. We need you to put that assistance to work for the American economy.

Banks Obdurate
But, as you know only too well, very little has happened since Secretary Geithner spoke, nearly 10 months ago. And way too many American entrepreneurs with viable businesses are facing impossible trading conditions--and even bankruptcy--because of inadequate small business funding.

Merchant Cash Advances Offer a Way Forward
Merchant cash advances can offer an immediate source of working capital to those whom banks turn down. Of course, as with any borrowing, it's important to find the right lender, and understand fully what the loan terms involve. But more and more people are turning to this source of very fast business funding.

If you'd like to find out more, you can get up to five merchant cash advance quotes here.

Loans for Business--They Still Don't Get It

noreply@blogger.com (Peter Andrew) — Wed, 06 Jan 2010 14:53:00 +0000

Merchant Funding: Some Reality

Back at the beginning of last November, Equifax, a firm specializing in credit intelligence (an oxymoron, if there ever was one), published some data about small businesses. The report found that, at 9,361, the number of bankruptcy filings for small businesses in September was up 27 percent on the same month in 2008. Comparing the entire third quarter of 2009 with that of 2008, the rise was a full 44 percent.

In an accompanying statement (if only of the obvious), Dr. Reza Barazesh, head of North American research for Equifax's Commercial Information Solutions division, said:

Economic pain is continuing for small businesses across the country. We're still seeing hefty increases in the number of bankruptcies in a lot of major metro areas.

Much Left to Discover

Fast forward to December 28, 2009, and a press release from Discover Financial Services, "a leading credit card issuer, and electronic payment services company." It carries out a regular survey, called Small Business Watch, which monitors the opinions, and attitudes of those who own SMEs.

The press release's opening paragraph started:

Economic confidence among America's small business owners was steady in December as fewer of them believed the U.S. economy was getting worse compared to November, and more saw conditions for their own businesses getting better in the next six months, according to the Discover Small Business Watch.

Phew! So everything's all right again. Economic panic over.

Devil in the Detail

But wait. Read a few lines down, and details emerge. For instance:

22 percent see conditions for their own businesses getting better in the next six months, an improvement from 19 percent in November; but still in contrast to the 52 percent who see conditions getting worse, 24 percent who see things staying the same, and 3 percent who aren't sure.

So maybe it's a little early to be popping Champagne corks.

Small Business Loans Still Not Fit for Purpose

The reality is that business funding remains a serious issue for all too many SMEs. Banks are still not lending to many good, solid customers.

If you're struggling to find the money to run or grow your business you may want to think about the pros and cons of a merchant cash advance.

Merchant Cash Advance: Right for Your Business?

noreply@blogger.com (Peter Andrew) — Mon, 28 Dec 2009 13:44:00 +0000

"Earth to the Wall Street Journal..."
When it comes to business funding, are we all living on the same planet? The question arises because today's Wall Street Journal seems to have drifted off into a world of its own. It says:

To prevent crumbling housing and credit markets from sinking the broad economy, the Bush and Obama administrations and the Federal Reserve spent, lent and invested more than $2 trillion on one initiative after another. If you owned a credit card or a money-market fund, had a savings account, bought a Dodge pickup or even a hunting rifle, or borrowed to buy a home or finance a small business, odds are good that the U.S. stood behind you or the firm that served you.

Well, yes. Maybe. If you did "borrow [to]... finance a small business", then maybe "the odds are good that the U.S. stood behind you." But what were the chances of your being able to borrow?

Small Business Loans--The Reality
Back in the real world (in Birmingham, Alabama, to be precise), people seem to have a firmer grasp on the facts. Last week, the Birmingham Business Journal ran a piece about business loans.

And, under the headline, "Small business advocates: Tight bank lending is 'dire'", it reported:

Banks are still pulling the rug from under local small businesses, even though the economy appears to be headed in a positive direction, small business advocates say.

Commercial Loans Dry Up
And the piece went on to quote Bob Dickerson, who's the executive director of the Birmingham Business Resource Center. He said: "The banks – who raked in money from the national bank bailout program – pulled lines of credit and declined to provide new lending opportunities to credit worthy businesses... The small business sector is what’s going to bring the economy back. However small businesses haven’t received anything close to a bailout. Banks’ retrench in lending has had a dire impact.”

Merchant Cash Advance Offers a Way Forward
For all too many small businesses, this lack of available credit threatens their very existence. If you're in that position, and need to find alternative sources of finance--including a merchant cash advance--try clicking here.

Merchant Cash Advances Aren't Cheap. But What Capital Is?

noreply@blogger.com (Peter Andrew) — Mon, 21 Dec 2009 15:36:00 +0000

Loans for Business All But Disappearing from the Mainstream

Last week, this blog mentioned a CNN Money report that small business loans from mainstream banks had been cut by a billion dollars in October, 2009. But what wasn't--but should have been--said here was that the CNN piece went on to talk more about business funding:

The 22 banks that got the most help from the Treasury's bailout programs have decreased their small business lending by a collective $11.6 billion since April, when the Treasury began requiring them to file monthly reports. The banks' total lending has fallen 4.3% in that six-month period, to $257.7 billion.

So, all those tax dollars that the big banks hoovered up in bail-outs have benefited, er, the big banks--and nobody much else. No wonder small entrepreneurs can't find the business funding they need.

Merchant Cash Advance: Not for Every Business

Back in August, AdvanceMe, Inc. published a white paper entitled 'Merchant Cash Advance: Not for Every Business. Is it Right for Yours?'

AdvanceMe describes itself as 'the nation's leading provider of Merchant Cash Advances to small and mid-sized businesses' so you might expect this to be a self-serving document. And it certainly isn't beyond criticism. But it also makes some good points.

Small Business Loans Aren't Cheap Anywhere

Of course, merchant cash advances (MCAs) are expensive. But if mainstream bank loans are rarer than hens' teeth, then what's the alternative?

The AdvanceMe white paper gives a few examples of when it makes sound business sense to sign up for an MCA after your bank has turned you down, or when its loan application processing is too long-winded. Here are two:

Your nearest competitor goes bust, and you have the once in a lifetime chance to buy up its stock for next to nothing. Do you pass up that chance--and lose real money--because you're not prepared to pay MCA rates?
You own a restaurant somewhere very hot and steamy, and your air conditioner finally packs up. Do you close down while you wait for your bank's small business loans department to get its act together (or, more likely, to change its lending policies so you qualify), or do you find a lender who wants to do business with you?

Speaking of lenders who want to do business with you, you can merchant cash advance providers all over the web. Why not start here?

Merchant Cash Advances Set to Grow

noreply@blogger.com (Peter Andrew) — Thu, 17 Dec 2009 12:57:00 +0000

Few owners of small businesses choose to take out a merchant cash advance (MCA). It's far from being the cheapest form of borrowing, and most businesspeople will have been to a bank before applying to an MCA provider.

But banks routinely turn down small and medium-sized enterprises that--just a few short years ago--they'd have been falling over themselves to lend to. And things are actually getting worse.

Just yesterday, CNN Money reported that small business loans from mainstream banks are rarer than ever. Indeed, the major banks actually cut their lending to small businesses by a billion dollars in October, 2009.

The White House press office reports that President Obama met a dozen CEOs of major banks Monday, and urged them to provide the business funding that SMEs so desperately need. He said afterwards:

So my main message in today's meeting was very simple: that America's banks received extraordinary assistance from American taxpayers to rebuild their industry -- and now that they're back on their feet, we expect an extraordinary commitment from them to help rebuild our economy.
That starts with finding ways to help creditworthy small and medium-size businesses get the loans that they need to open their doors, grow their operations, and create new jobs. This is something I hear about from business owners and entrepreneurs across America -- that despite their best efforts, they're unable to get loans. At the same time, I've been hearing from bankers that they're willing to lend, but face a shortage of creditworthy individuals and businesses.

Meanwhile, today's New York Times carried a highly sympathetic report about the challenges of small business cash flow.

But until banking practice catches up with public, political, and commercial sentiment, merchant cash advance providers will remain an expensive, but necessary, and welcome lifesaver for many SMEs.

Merchant Cash Advance: Easy to Find and Use, but Danger Does Lurk

noreply@blogger.com (Peter Andrew) — Thu, 19 Nov 2009 12:51:00 +0000

It doesn’t take long for a financing secret to spread, particularly in a challenging economic environment. That may explain the recent increase merchant cash advance (MCA) business. This form of financing bucks the modus operandi of traditional lending in several unique ways. But choose an MCA vendor wisely. Here’s why.

MCA Qualification a Breeze
The first difference between a merchant cash advance and traditional loan is the qualification process. MCA vendors will take you on when many big bank lenders won’t. According to the Techspice blog, credit history has no bearing on whether or not you qualify for an MCA. Because you’re trading a portion of future sales, all you need to show is that your business is profitable. MCA vendors will do the rest.

MCA Versatility Confirmed
The MCA can be used for just about anything related to growing your business. And repayment is on a sliding scale that’s sensitive to the seasonal ebb and flow of your particular industry. AllBusiness reveals these features of the MCA that attract a wide range of companies:

Repayment tracks the revenue trend of the merchant's business
Promotes healthy cash flow within the business
Payback is automatic based on a set percentage of sales

MCA Pitfalls Exist
Just like with any financial arrangement, you should take care as to who you align yourself with. There are unscrupulous MCA vendors out there who know how to take advantage of you. The Dallas News reminds you to take the time to filter out the notable merchant cash advance vendors to avoid costs that can reach 28 percent of every dollar.

Unsecured Business Loans: Leaving the US and Heading to China

noreply@blogger.com (Peter Andrew) — Fri, 13 Nov 2009 17:05:00 +0000

The unsecured business loan is entering into a unique period of its development. This familiar form of business financing is leaving the country that made it famous and moving to the Orient. Perhaps because we’ve abused it for so long. Or perhaps because China has a financial infrastructure to handle its consequences. Whatever the reason, unsecured business loans are changing before our very eyes.

Goodbye, Red, White and Blue
BusinessWeek blogger John Tozzi explains an interesting conundrum. In his post ‘What’s the future of small business credit?’, he describes the movement of business from ‘brick and mortar’ to online--and the financing difficulties this trend creates. Big banks are far less apt to grant a $20,000 unsecured business loan for online add placements than for tangible pieces of equipment that can be liquidated if the business fails to make payments.

Hello, Country of the Rising Sun
Unsecured business loans may be disappearing in North America, but they’re just gaining a foothold in China. Citibank (China) has launched unsecured loan programs in Beijing. First launched in Shanghai in May 2008, this non-collateral loan offering has caught on and is spreading. And the best part of the program is that the APRs on these loans will stay steady even through a volatile market.

Unsecured Business Loans for Your Business
AllBusiness discusses unsecured business loans for those brave enough to seek them out. Lenders look at the credit history because the responsibility to repay the loan will fall on the owner. Carefully determine what the loan is for, how it will benefit the business and how you’ll repay the principal.

Merchant Funding Offers Options for Seasonal Businesses

noreply@blogger.com (Peter Andrew) — Wed, 28 Oct 2009 03:22:00 +0000

Restaurants. Holiday boutiques. Sports stores. All are seasonally-bound businesses and all require special financing options to remain solvent. Merchant funding is certainly a fave with these and other non-seasonal businesses looking for start-up or expansion capital. Here’s how merchant funding financing works.

Merchant Funding and Other Options
AllBusiness reveals the characteristics of merchant funding that make this form of financing so attractive to those businesses that disdain the traditional lending process. The money advance is based on potential credit card sales. That means no down payments, no APRs and no credit checks. The downside is that you’ll probably have to open up a merchant account with your vendor.

Canadian Merchant Funding Streamlines
Canada has made the merchant funding process even easier to attain by tying in their lending with a collection of small business banks. Businesses no longer have to change banks--or even account numbers--when they apply for merchant funding. All requests go through a central processing entity that dispenses capital through existing accounts.

Refining the Merchant Funding Strategy
As the merchant funding process ages, the process is beginning to mold to the needs of small to mid-sized businesses. One way to illustrate the change is through flexible lending criteria. Businesses must simply show up to a year of credit card sales receipts and proof that the business isn’t bankrupt or in serious financial disarray.

Merchant funding has been around for ages in some form or another. But recent developments in the industry are making it an increasingly attractive way to earn financial backing.

Business Cash Blues: Sources of Cash Scarce and Where Yours Might Be Hiding

noreply@blogger.com (Peter Andrew) — Tue, 20 Oct 2009 19:37:00 +0000

The Small versus Large Business: Cash Flow Reveals A Glaring Divide
According to Cortera, a community-driven business information company covering businesses with less than 500 employees, there’s a growing gap between the payment behaviors of large and small businesses. In fact, small businesses are paying invoices 25 percent slower than a year ago and 20 percent slower than the overall business average. While that may be good news for large businesses, analysts believe the growing divide signals a clear warning that the average small business owner is in trouble.

Some Small Businesses Stop Accepting Cash Altogether
As scary as that sounds for the consumer, it’s actually happening with small business all across the country. For example, Twin Cities Business writer Hans Eisenbeis reveals that restaurants in the northeast are restricting sales to customers with plastic exclusively. While the practice encourages flexibility and privacy, the movement weakens the value of the dollar in theory and practice--something that the country can hardly afford.

Find Your Hidden Business Cash Sources
Susan Ward, About.com’s Guide to Small Business: Canada, suggests looking to outside help in raising your business’ cash flow. For example, cloud computing leverages existing technology resources to lower your tech expenses. Also, bartering services with other businesses encourages welcomed exchange without tying up business cash in the process. And finally, peer-to-peer lending takes traditional big banks out of an already complex economic network-- a trend that should continue in the near future.

Venture Capital and Equity Funding Tap Out--But Business Funding Options Do Exist

noreply@blogger.com (Peter Andrew) — Tue, 13 Oct 2009 01:24:00 +0000

The Venture Capital Industry Takes It on the Chin
If CEOs have their minds on venture capital, they better come up with a contingency plan--and fast. Michelle Meyers, cnet news associate editor for media, entertainment and politics, reveals that venture capitalists saw a 50 percent decline in investments over a single quarter. The drop from $7.78 billion to $3.90 billion demonstrated just how little interest there is in backing US companies.

High-risk EU Equity Funding Lures Outside Interest
If companies could finance themselves, high-risk funding wouldn’t even exist. Instead, business owners count on capital for start-up and expansion from such sources as business angels, venture capital, and stock markets that specialize in high growth companies. In the EU, the European Commission is strategizing to improve equity investments. The EUbusiness blog states that business funding from angel investors shows the most promise of the three types.

Business Funding Options to Consider
If you’re taking inventory of your business’ credit worthiness, allBusiness lists these small business loans options worth considering:

Small Business Loans. Such as banks, credit unions, the U.S. Small Business Association, or angel investors
Merchant Cash Advance. Based on potential credit card sales and typically requires a merchant agreement
Unsecured Business Loans. Not secured against the borrowers assets and can have double-digit APRs

Considering how much money you need, how it will be spent, how long it will take to be repaid and “Plan B” are all indicators of the business funding type that will fit your organization.

Loans for Business: Is the ARC Making It's Farewell Tour?

noreply@blogger.com (Peter Andrew) — Wed, 07 Oct 2009 17:45:00 +0000

The government’s ARC loan program has helped businesses across the nation get loans for business start-up and expansion. But it hasn’t been without its hitches--and now it may be on the way out. Here’s a quick look at the ARC loan program in its swan song.

What is ARC? Why Haven’t I Heard of It Before?
The Small Business Administration’s America’s Recovery Capital Loan Program provides up to $35,000 in short-term relief for small businesses that face immediate financial hardship. The money is intended to help business through the current uncertain economic times and begin the process of returning to profitability. Funds are delivered over six months and repayment begins twelve months after the last disbursement.

What Issues Have Affected ARC’s Success?
While the loan strategy is built on a promising concept, business owner’s in the trenches say that the loans for business are coming too little, too late. CNNMoney.com staff reporter Catherine Clifford reveals that big banks have been reluctant to participate. According to the Small Business Administration:

The ARC loan program has backed 2,715 loans
The total business loan amount equals just over $88 million
The average commercial loan size is $32,425

Is ARC Sailing Away?
According to Sam Thacker, partner in Austin Texas based Business Finance Solutions and AllBusiness columnist, time is running out on several of the temporary SBA commercial loans programs. Many are scheduled to be phased out by December 31. For business getting in on the tail-end of the program, that just might be too late.

Restaurant Financing: Thawing Credit, Frozen Hiring, and How the MCA Can Get Everything in Synch

noreply@blogger.com (Peter Andrew) — Sun, 27 Sep 2009 00:14:00 +0000

On the restaurant financing scene, mixed signals have some stalwart eateries calling it quits while a new generation of lean up-starts jumps in the mix. It finally appears credit is thawing at a slow-but-sure rate. However, it’s the hiring belt that’s freezing-up this time. Perhaps MCAs can get everyone in line.

Credit Drips Slowly Back to Its Former Self
A couple of recent developments have positively affected restaurant financing. According to QSR Magazine’s Operations expert blogger Nick Diulio, the American Recovery and Reinvestment Act includes more than $630 million in funding to improve and strengthen SBA loan programs. Also, the Federal Government is expected to purchase up to $15 billion of loans from the SBA 7(a) and 504 lending program to encourage new small-business lending.

Hiring-timid Owners Stall Initial Progress
But it seems that all of the restaurant loan news isn’t always on the up-and-up. Restaurant News Resource reports that a general aversion to hiring new staff members as the recession slowly recedes is hampering the growth progress. In fact The NPD Group, a leading market research company, all segments of the U.S. restaurant industry experienced traffic declines in the first half of 2009.

Merchant Cash Advance Might Satisfy Everybody
Vendorseek, one of the fastest growing business resources online, reveals that the merchant cash advance financing is still ideal for organizations that depend on receipts--such as restaurants. No APRs and repayment based on monthly volume is an attractive arrangement for these businesses. Plus, immediate access to funds is another critical benefit.

Merchant Cash Advance Potpourri: Why It Beats Traditional Lending, the Downside, and How to Choose

noreply@blogger.com (Peter Andrew) — Thu, 24 Sep 2009 15:52:00 +0000

The merchant cash advance has gained notoriety as of late, particularly in these challenging economic times. While the requirements to obtain an MCA are tightening, this financing vehicle still holds the edge over the traditional loan.

Increasing Criterion Make MCAs More Challenging to Get
Small and mid-sized business looking for financing via merchant cash advance will be met with additional hassles. According to a report from Access My Library, merchants experiencing the difficulties of inflation and available credit are passing them on to potential customers. However, merchant cash advances still hold all of the benefits that made them popular in the first place: no APRs, no down payments and no collateral.

MCAs Still Trump the Traditional Financing Options
Francisco J. Acosta, Executive Vice President of Internal Business Consulting, emphasizes the power of the MCA over traditional lending. Acosta reveals the following big bank policies that make borrowing difficult:

Banks loan money based largely on FICO score; anything under 680 usually results in a decline, a rate that is up to 98%
Banks demand repayment on a fixed schedule; miss a payment and interest rates will go through the roof
Banks typically will not lend you any more money during a repayment period

How to Choose a Reputable MCA Lender
Los Angeles Times blogger Karen E. Klein advises several tactics for choosing the right merchant cash advance vendor. Her top suggestions for picking correctly include choosing a strong franchise brand and reject any offers that require an application fee of any kind.

You can get more management advice, including financing support and direction, from AllBusiness. "Managing in the new millennium: managing in an economic downturn" discusses the challenges facing CEOs and why a merchant cash advance may be one piece of the puzzle.

Unsecured Business Loans: Mixed Signals from the Front Lines

noreply@blogger.com (Peter Andrew) — Fri, 11 Sep 2009 14:01:00 +0000

To use unsecured business loans for start-up or expansion--or not to use? That's the question facing many small business owners who find themselves capital-hungry but short on collateral. And mixed signals from lenders aren't helping.

The Brits are Shying Away from the Unsecured
The UK can be seen as a microcosm for tanking unsecured business loans trend. According to Online Loans, there has been a 37 percent drop in the number of providers offering unsecured loans since July 2007. In addition to the drop in activity, the fees for this financing vehicle have grown considerably. To make matters even worse, those that are still lending are moving the unsecured portion to a different branch, such as the Barclays Bank brand.

The Feds are Embracing the Unsecured
The Personal Money Store blog is quick to point out that the Federal government has not turned its back entirely on unsecured business loans. Federal Reserve Chairman Ben Bernanke is of the opinion that the health and viability of small businesses depends entirely on access to sufficient operating funds. Unsecured business loans may be required to do that, as owners find themselves with little collateral to offer other than future business.

More Changes that Effect Unsecured Borrowing
Andrew Freiburghouse, a writer, businessman and blogger for Rebuild.org, summarizes several new changes to unsecured business loans that will no doubt affect the way owners borrow in the immediate future. They include a simplified application process, the inclusion of a solid repayment plan, and the virtual disappearance of credit card lines.

Could Commercial Loans Collapse Major Banks and Small Businesses Along With Them?

noreply@blogger.com (Peter Andrew) — Thu, 27 Aug 2009 21:48:00 +0000

The recent rash of commercial loan losses is threatening not only traditional lenders, but the small businesses that rely on them for start-up and survival. Could this be the trend that brings everything to a head? And what role does cash flow management play in the equation?

Commercial Loan Losses Pile Up
A Stand & Poor’s article in Seeking Alpha warns of the looming disaster as unresolved commercial loans continue to grow. Lower profit margins are forcing many banks to reserve stockpiles of cash assets that they would normally extend to small businesses for start-up and expansion.

Businesses Still Can’t Borrow Money
The New York Time Small Business section summarizes the conundrum facing small businesses across industries. Despite billions of dollars of bailout and stimulus money, timid lenders are tightening credit standards to the point that small businesses without a sterling track record are left in the lurch.

How to Control Cash Flow
A PowerPoint presentation authored by the Small Business Administration (SBA) suggests that controlling your cash flow could be the key to surviving the credit crunch. The future of commercial loans could depend on these factors:

Ratios to Watch. Days receivable, days payable and days inventory
Program Mods. The SBA is temporarily suspending loan fees and increasing the insurance rate to 90 percent
SBA Coverage. Credit-worthy businesses can borrow up to 6 months of payments, or $35,000

The commercial loan industry is making a fragile comeback. Small businesses that mind cash flow will improve their chances of remaining solvent.

Merchant Funding: What to Expect, What to Avoid and How to Choose

noreply@blogger.com (Peter Andrew) — Mon, 24 Aug 2009 17:08:00 +0000

Merchant funding is fast becoming the alternative financing option of choice for small businesses seeking start-up or expansion capital. However, as with most financial vehicles, it’s not without its hitches. Here’s more on merchant funding activities from several consumer fronts.

How Merchant Funding Works
The GreenDOC blog offers a fairly robust explanation of the merchant funding agreement. Perhaps the most alluring benefit is that it requires no collateral or personal guarantee by the borrower. In fact, if you've owned a business for at least 6 months and process at least $3,500 in monthly credit card sales, chances are that you can secure a merchant funding agreement.

The Ugly Underbelly of Merchant Funding
Despite the seeming innocence of this funding source, there are always pitfalls of which you should be aware. DIRECT Mag reveals the seedy side of merchant funding deals that come with illegible fine print and outrageous annual percentage rates. For example, the FTC recently cracked won on several merchant lenders who charged as much as a 4.981% annual percentage rate--hidden in extremely fine print.

Evaluating a Potential Merchant Funding Partner
BusinessWeek offers several techniques for evaluating a choosing a merchant funding partner that will ensure that you don’t get the short end of the stick. These include checking with potential lenders for quality, asking for and following-up with referrals from former clients, and signing an ironclad contract that your personal business attorney reviews for accuracy.

Business Cash: How to Handle “The King” of Small Business Growth

noreply@blogger.com (Peter Andrew) — Thu, 20 Aug 2009 16:22:00 +0000

We all know cash is king. You learn that on your very first day of Economics 101. Even in these uncertain economic times, cash is the great equalizer. Here’s more on how investors, small businesses and newbie CEOs secure cash for start-up and expansion.

As Cash Popularity Goes Up, Stock Performance Goes Down
PhilStar.com presents an interesting conundrum with respect to the availability of cash and the health of the market. It seems as though the more cash investors scoop up for themselves, the more the reverb can be felt throughout the stock market and the economy in general. As stock investors see their cash flow squeezed, it fosters a feeling of insecurity that can be felt across markets.

How Small Businesses Will Respond to the Cash Jam
In short, furloughs and layoffs. Small business owners holding IOUs in the form of bad debts are creating contingency plans to keep their businesses afloat. CNN Money reports that the California state legislature’s failure to close a $26 billion gap may leave many in the lurch. The resulting rhetoric forces CEOs to brace for the future.

Business Owners Learn to Manage Cash Flow
It could be the single most important skill to master. Knowing what your cash balances are today and during the next six months is important to remaining solvent in a sea of failures. Small business owners are encouraged to take formal business cash classes in managing money to avoid missteps in operations.

Business Loans: How is the ARC Being Received and How Can I Get One?

noreply@blogger.com (Peter Andrew) — Fri, 14 Aug 2009 16:26:00 +0000

ARC. America's Recovery Capital program. It’s the Obama Administration’s outreach to struggling small businesses and it’s dominating the financial headlines. But is it really helping? Let’s examine the latest updates on ARC business loans and how you can get one for your struggling small business.

The ARC is On, But Banks Aren’t Participating
At least not without careful scrutiny of the applying business, that is. According to CNNMoney Small Business, the 10,000 loan mark by 2010 should be met--but progress is slow and deliberate. Here is ARC business loans by the numbers:

Participating Lenders. About 400 out of 8,200 FDIC-backed US banks
Actual Lenders. Wells Fargo, PNC Financial and Zions Bank--3 out of 10 of the SBA’s most active lenders
Default Forecast. The SBA figures around 56 percent
The Offering. $35,000 in interest-free money

What’s Causing the Delays?
The Sacramento Bee offers several reasons why the ARC business loans program is slow to reach its full potential, outside of timid lenders. The acceptance guidelines are a primary affecter, as business must show at least two years of steady profit growth. Another problem is the issue of how lender guidelines mesh with the Federal government.

How to Get Yours
The New York Daily News offers this advice for small business owners interested in applying for ARC business loans in the near future.

Gather financial records, both professional and personal
Present a strategic business plan that covers all bases
Find the right loan and lender for the business

Owners are encouraged to look for loans that cater to their specific market as opposed to applying for blanket business loans. Niche lenders understand the particular challenges of the industry and can work with applicants in that regard.

Small Business Loans: Government versus Big Banks, and Why They Can’t Synch-up

noreply@blogger.com (Peter Andrew) — Thu, 06 Aug 2009 11:12:00 +0000

The Feds are offering small business loans that hardly any businesses are taking advantage of. The big banks are clamoring for more local control of their government-funded loan offerings. Both groups seem out of touch with what owners really need to respect to start-up or expansion capital. Why can’t everyone get on the same page?

$255 million at No Interest: Any Takers?
Gazette.net reports that we have the Obama administration offering short-term, interest-free loans to the tune of up to $35,000 to cash-strapped small businesses--and it doesn’t seem like anyone is interested. It’s called America's Recovery Capital Loan program, funded with $255 million by the American Recovery and Reinvestment Act. To date, only three loans have been processed in the Baltimore district, with only two in the Washington, D.C., district. The newness of the small business loans program may be partly to blame.

British Small Businesses Say “Let Us Decide”
Across the pond, big banks are begging for the chance to have more flexibility in their lending. A UK press release cites bank officials contending that, because their closer to the ground, they have a better feel for those small businesses that have a good chance of making it.

Obama Pushes for Big Banks to Open Up
Almost as a response to big bank excuses for the turmoil, President Obama chided 21 federally-funded banks for not doing enough to stimulate borrowing. Fox News reports that Obama believes federal bail-out money is going toward institution debt as opposed to small business owners--the original intention.

Business Funding: Disappearing VC, the Microloan, and Impressing the Loan Officer

noreply@blogger.com (Peter Andrew) — Tue, 28 Jul 2009 16:06:00 +0000

The business funding world has literally been turned on its ear by the current economic situation. Venture capital opportunities are vanishing before our very eyes. But microloans are on the rise and dazzling your loan officer increases your chances of getting one.

Venture Capital Funding on Life Support
Cnet news reveals a stark impression about the absence of venture capital for businesses from start-ups to the majors. According to Dow Jones VentureSource, venture capital investment in US companies is down nearly 50 percent in a single year--from $7.78 billion to $3.90 billion. The IT industry has been hit particularly hard, with its VC at the lowest point since 1997. In effect, interest in unproven business models just isn’t there.

The Microloan Makes a Comeback
Financial guru Pat Gage, author of The "10 Steps To Money®" system and expert on acquiring business funding for small businesses, raves about this type of loan vehicle for start-ups and expansions. Microloans typically come in amounts of between $13,000 and $35,000--and entirely backed by the Small Business Administration. Support from the SBA gives you much more clout when dealing with traditional banks and lenders.

How to Impress Your Loan Officer
This is critical. So much so the US News and World Report offers some basic advice on what to do--and not to do--when you walk into the loan application meeting.

Come Well Equipped. Have your finance package filled out completely and bring a copy of your business plan
Have the Numbers. Be ready to present financial projections and explain how you got them
Get Your Financial House in Order. In order to get business funding, you’ll have to show that you can manage your own personal finances

Loans for Business: From Private Equity to Traditional Lending, the Outlook is Grim

noreply@blogger.com (Peter Andrew) — Mon, 27 Jul 2009 16:12:00 +0000

Despite the signs of an economy attempting to pull itself out of the mire, loans for business just aren’t materializing as you might expect. Traditional lenders are a literal no-show and private equity is in a virtual deep freeze. Setbacks like these have small businesses looking internally for capital.

A quick look at the numbers says it all. USA Today reports that the National Small Business Association has revealed 42 percent of small-business owners aren’t getting the loans for business they need to become competitive--or even remain stable. The worst news is that the figure is up from 33 percent just last December. These statistics seemingly fly in the face of proposed economic stimulus packages.

The news from GOP USA is similarly bleak. The government was left holding $2.1 billion in write-offs of small business loans it had guaranteed last year. That’s a new record and one that has sent the process of acquiring loans for business is a continually downward spiral. The Small Business Administration purchased $2.1 billion in bad business loans that have placed a strain on the SBA’s ability to offer better financing vehicles.

With respect to the noticeable absence of private equity--such as venture capital, business angel capital, management buy-ins, management buy-outs, and mezzanine arrangements--small business owners must consider in-house financing opportunities. These include merchant cash advances and equipment leasing. Those businesses that can capitalize on inside resources have a distinct advantage in a challenging economy.

Restaurant Financing: Four Things You Must Know

noreply@blogger.com (Peter Andrew) — Wed, 15 Jul 2009 16:33:00 +0000

Despite the uncertain economic times, some service industries are doing remarkably well. As consumer save more cash, they’re able to spend more on entertainment--meaning it just may be the right time to start an eatery. Here are four things you must know about restaurant financing.

1. Restaurants Can Beat The Recession
According to a new survey by Franchise Times, 9 of the Fast 55-- the 55 fastest growing, young companies-- are sit-down or fast food restaurants. The list was compiled using the percentage of growth experienced over the last fiscal year. The surprise showing by these restaurants echoes expert opinions that restaurants opened in the right location and serving the right market can resist the negative impact of a lingering recession.

2. The Start-up Capital Search Isn’t Easy
QSR Magazine has some sobering news for those looking to acquire restaurant financing for start-up or expansion. Getting the needed capital requires a strong history of performance and the right numbers on the balance sheet. These standards are forcing newer restaurants to investigate less traditional financing vehicles, such as merchant cash advances and internal liquidation sources.

3. Obama’s Legislation Will Affect Restaurant Financing
Larry Summers, director of the US president’s National Economic Council, relays the developments within the Obama legislation that will affect restaurant financing in the coming four years. In an interview with Financial Times, Summers points out that fixing the current banking system requires tougher management of credit. This partly explains the difficulty some restaurateurs will experience in securing financing.

4. Franchises May Be The Way to Go
Morningstar reveals the recent tendency of large franchises to convert corporate-owned resources into more locally-owned franchises. This could be an opening for potential restaurateurs to move into management with established companies.

Merchant Cash Advance 411: Why You Should, Why You Shouldn’t, and Why It Matters

noreply@blogger.com (Peter Andrew) — Mon, 06 Jul 2009 17:11:00 +0000

The merchant cash advance is one of those interior financing sources that many businesses shy away from. Some do so because they’re uninformed--some feel more comfortable with traditional financing options. But some businesses appreciate the value of an MCA--and they’re taking advantage of its power for start-up and expansion activities.

The Skinny on the Merchant Cash Advance
BusinessWeek offers a timely overview of the merchant cash advance industry for those considering getting their feet wet. Some industry highlights to become familiar with:

The Deal. Merchant cash advance lenders offer businesses a lump sum payment in exchange for a share of future sales, actually based on a percentage of past receipts.
The APR. According to Leonard C. Wright, "Money Doctor" columnist for the American Institute of CPAs, annual percentage rates can range from 60% to 200%.
Noticeably Absent. Unlike traditional lending vehicles, with MCAs there is no due date and there is no fixed payment.

Why Some Averse to MCAs
Inc., the daily resource for entrepreneurs, points out some of the drawbacks of the merchant cash advance. Despite its seemingly quick cash-flow provisions and favorable terms, the annual percentage rate is viewed to be a bit pricey. Also, more unscrupulous lenders have been known to extend more money than they know the client is able to pay in an effort to launch a cycle of indebtedness. However, industry watchdogs are quick to point out that new Federal regulation is leveling the playing field.

The Bottom Line
Internal Business Consultant Francisco J. Acosta, EVP, says it best: The only way to beat a cash advance is to get the bank’s absolute best rate and put up everything you own as collateral. Otherwise, MCA wins every time.

Unsecured Business Loans: Separating the Good from the Bad and Asking Direct Questions

noreply@blogger.com (Peter Andrew) — Thu, 02 Jul 2009 17:08:00 +0000

Unsecured business loans are proving unsettling in the current economic situation. SmartMoney’s Small Business Site presents two side of the coin: the problems associated with small business loans and the investors who are ignoring the red flags. Also, small business advocate and consultant Sue Malone offers specific questions to ask when seeking out an unsecured business loan.

The Statistics Stack Against Unsecured Small Business Loans
According to Marshall Eckblad of SM Small Business, steady losses are having an anchor affect on the US economic recovery. Rising commercial real estate delinquencies handcuff banks and sates continue to face dwindling tax revenues. Some statistics of note include:

SBA losses more than doubled in 2008 to almost $1.3 billion
SBA took permanent losses of nearly $504 million in loan amounts

But Don’t Hang your Head Just Yet
SM Small Business’ Diana Ransom paints a rosier picture of the ability for businesses to obtain unsecured business loans from investors. According to Ransom, although they’re not handing out money hand over fist, investors are lured by the lean qualities of today’s burgeoning start-ups.

Here’s How to Handle the Banks
If your business is searching for unsecured business loans, business advocate and consultant Sue Malone shows you how to dodge the rhetoric of lenders by asking a few basic questions.
1. Are you actually entertaining small business loans at this time?
2. How many loans have you personally made in the last 30 days?
3. What are the typical loan terms for the amount of loan I’m seeking?
4. How long will it take before I get a decision?
5. Who will be responsible for final approval?