Why a Merchant Cash Advance Works
With banks continuing to deny small businesses loans the need to access capital continues to grow. The merchant lending industry is taking advantage of this need for capital by supplying small businesses with cash advances. Commonly known as a merchant cash advance this transaction or advance is a lump sum payment based on an agreement for a small portion of future sales. If managed correctly this tool can be very advantageous for small businesses.
There are several reasons why a merchant cash advance is so attractive. First, it has no fixed term. This means that the cash advance is based on an agreement to give the cash provider a very small agreed upon rate of future sales. The benefit from this is if sales are slow for a period of time the payments to the cash provider are adjusted downward. This feature can really make the payback much easier because there is no set payment that must be made every time. By having a smaller payment when business is slow makes paying back a cash advance a very fair process.
Applying for a merchant cash advance is also a much quicker and easier process. To begin, it requires a lot less paperwork. Owners seeking finance can simply go to one of many of the online lenders and fill out a very quick application. Because the process is so simple there are no fees associated with applying. Owners can feel free to explore their financing options without having to worry about time or application costs.
Another great benefit of the cash advance application process is merchant lenders don’t have to follow the red tape of traditional banks. No red tape means that lenders are much more likely to approve applicants who have bad credit. Because the exchange is based on future sales, credit checks are less important, and cash advance providers do not require collateral or personal guarantees. The whole application process for a merchant cash advance not only saves business owners the time and cost of applying to bank after bank, but it also makes it less likely that an applicant will experience the demoralizing sentiment that a rejection can often leave lingering.
Lastly, and a feature that shouldn’t be overlooked, the payments are all set up from the beginning electronically. That means there are no late payment fees or the time consumption involved with paying attention to bills. Business owners often see late fees piling up in trying times because they just can’t deal with the list of creditors sending notices. The structure of a cash advance allows owners to save time and money and focus on their business.
Merchant cash advance lenders provide critical financing options for business owners. The structure of the cash advance has several advantages to traditional financing and can be the difference in whether or not a company succeeds or fails. If you are a business owner a merchant cash advance is a viable option for financing your company.
Here is a list of some online Merchant Cash Advance Providers:
http://shieldfunding.com
http://economyfunding.com
http://unsecuredbusinessloansforwomen.com
http://limefunding.com
European Downgrade Threats Stimulate Cash Advance Programs in U.S.
The recent Standard & Poor’s threat to downgrade up to 15 countries in the Eurozone has some merchant cash advance lenders in the U.S. preparing for a surge in funding requests. A recent article by the NY Times suggested, “American money market funds have been closing the spigot of money they lend to European banks, forcing them to tighten lending standards and, in some cases, even withdraw financing from longtime customers”. With local banks making it difficult to get a loan even for some of the better companies, it is likely that they will have to move on to second and third tier options.
Merchant Cash Advance lenders fall into the outer tier lending options. There are two reasons why these lenders look so appealing. First, their lending programs are more risk tolerant due to higher premiums and shorter term loans. Secondly, their lending criteria considers future revenues to pay off the business loans and it puts less emphasis on credit history or prevailing economic conditions.
Why the U.S. merchant cash advance lenders and not the local European firms? First of all, the tightening of the money supply in Europe will have a trickledown effect to second and third tier local lenders because of money supply issues. Also, these local hard money lenders will be emotionally attached to the prevailing conditions that they experience every day and it is likely to make them more aversive to risk. Lastly, the arbitrage possibilities between the Dollar and the Euro, even if it is adjusted downward, will look so much more attractive to the company seeking cash. If you looked in many of the shopping malls and bellwether stores like Macy’s in New York City over the previous two holiday seasons you would have noticed that it was packed with European shoppers. The reason for this was because of the difference between the Euro and the Dollar. European shoppers love to come here and feel like everything they but is at a discount. Well there is no difference if the shopper is someone looking for a loan.
The merchant cash advance industry in the U.S. has seen sparkling growth over the last twelve months. According to Sam at Shield Funding, an industry leader in the merchant cash advance industry, “There has been a 250% jump in deals funded over last year”. Many lenders in the cash advance industry believe the growth has come from business owners learning that the product exists and that there are lenders out there who will lend money simply because you have a business with revenues. This stability and growth in the market will surely make these lenders more aggressive and risk tolerant.
As this industry continues to grow and awareness of the product catches on, there is no doubt that the cash advance industry will open its financial arms to many businesses foreign or domestic. This in combination with the European financial issues it seems likely that the merchant cash advance industry in the U.S. is preparing for additional requests for cash advances by companies in Europe.
Merchant Cash Advance: Saving Small Businesses
The credit gap still exists between small to medium sized businesses and banks. It is not just a bad economy that has banks tightening their lending practices. There are many reasons that a bank can refuse to give a company a business loan or line of credit; company owners can be refused for time in business, bad or poor credit rating, or companies can be refused because of the type of industry just to name a few. The relationship between banks and smaller businesses is definitely a harsh one and it has created this belief that a bank is no longer an option to get funding. According to Sam at Shield Funding, a leading provider of merchant cash advances for over a decade, “Business owners just don’t believe lenders are willing to give them money.” However, contrary to this popular line of thought, there is an industry eager to give them a merchant cash advance.
The merchant cash advance industry has exploded over the last year. Some merchant cash advance companies have seen as much as a 300% increase in their approved applications in 2011. The major reason for this growth is that according to some industry statistics more than 90% of business owners are denied traditional financing. Without banks available to finance a big portion of America’s businesses it is easy to see why the merchant cash advance industry is seeing this type of blossoming. The companies that are seeking financing are good solid companies just experiencing a slow period due to the economy, an understandable business cycle. In fact, some companies are looking to expand and take advantage of the weakened competition but the banks are only looking at the history or current situation of the applicant. This is why merchant cash advance lenders are coming to the rescue.
A merchant cash advance provider is not restricted to looking at a business owners credit history or the type of industry they are operating in, the merchant lender structures the business loan based on future credit card receivables. Even if you are a new business, which would almost instantly exclude you from traditional financing, you are likely to find a merchant lender willing to give you financing. What is even more attractive about a merchant cash advance is the payments for the loan are made as a percentage of receivables. So if there is a slow business cycle in your payback period, your payments will reduce accordingly. A merchant cash advance has many names like credit card factoring or an unsecured business loan, but it is just another name for a structured cash loan to a business.
The merchant lending industry’s only limitation is people just don’t know about it. Banks have stigmatized smaller business owners into thinking that there is no money out there when in reality there are merchant lenders lining up to finance businesses. Shield Funding and their corporate website http://shieldfunding.com is one example of a trusted merchant lender in the industry and there are a handful of others who are out there ready to save America’s small businesses.
Merchant cash advance lenders are a great resource for business loans when traditional financing is not an option.
