The U.S. Small Business Administration (SBA) has been instrumental in seeking favorable financing options for the large clientele it represents. A 2012 study SBA found that over 75% of small businesses could not qualify for bank loans due to increasingly stringent eligibility rules.
The National Small Business Association (NSBA) also carried a study on the same subject and found that over 60% faced closure in 2008 at the height of the latest economic doldrums. With most startups collapsing within 2 years of launch, there seemed to be no way out of the conundrum or was there?
Timely Alternative Business Financing
Financial analysts have argued that this unfortunate trend is due to limited financing options for entrepreneurs. Luckily, a blossoming parallel financing market has grown in form of merchant cash advance providers.
If you are a suave entrepreneur, you must have heard about cash advance providers who give you funding that is not based on your collateral or your credit score. This is not actually a loan but a purchase of a fixed dollar amount of your future sales.
In essence, these cash providers know appreciate your business needs cash urgently and they provide the same knowing that you will continue performing. Through your credit and debit card receivables, you are able to repay this money at an agreed rate.
You should appreciate then that when business is good you are able to repay a larger amount but when sales are down, the creditor will receive a lower amount. This is the reason it is called an advance on your sales as opposed to a business loan, which would come with fixed monthly repayments.
Getting Ahead with a Cash Advance
Assume you want to open a new branch in order to beat your competition to a certain neighborhood? Well, you can opt for a bank loan which will take weeks before processing and approval. Moreover, your bank will require tomes of documentations, proof of premise ownership or lease.
By the time this arduous process is done, the chance will have been lost especially if your credit score is not impressive. A local lender on the hand requires an online application with statements showing your current business cash flow and within 48 hours, you will have your cash to start expanding.
When you use this alternative financing option, there is nothing to lose because you already know your cash projections will cover the advance. If you are in a an existing business your operations will never slow down due to cash flow issues as an advance will untangle such a fix quickly.
Your competitors will be left befuddled as you will be moving at a pace that defies slow months and the repayment structure will never hurt you. Nevertheless, caution is called for when identifying a merchant credit provider in order to pick a reliable, reputable, honest and resourceful provider.
Are you experiencing the usual slow months and things are grinding slowly to a halt? It is time to start searching for a reputable merchant cash advance provider and breathe some fresh air into your business.
Bridget Kim is a financial expert with 28 years experience in banking and today consults both for public and private entities such as local lenders. She also writes prolifically on topical financial issues.