Working capital loans for today's retail businesses are increasingly tough to come by. While there is a lot talk regarding helping "main street" within the media and politics, the the fact is that the most cost effective working-capital for business is an SBA or Bank loan. Unfortunately, the restricted credit environment through which we find out here now ourselves means the great majority of these loans are not being approved for the retail businesses that need them most.
This leaves many retailers in the unfortunate position of going with a merchant cash advance from their credit card processing company. These cash advances for working capital are often billed as "convenient" and "unsecured" ways for owners to get "quick cash". The truth of the matter is, most cash advance companies do secure their loans via a UCC filing against the business. While it may not be within the owners personal credit, for many small retailers, having a UCC filing against their business is just not much different. It's a lien that is placed on the business until the advance is repaid.
What is usually left out is the fact that cash advance companies are not regulated by the government as loans. Consequently they're free to charge rates of interest, or factor rates, of 50% or higher. Even on a short-term working capital loan, this is an amazing amount of interest. Regularly, because it isn't a true loan, the MCA company has the choice of changing the rate anytime during the repayment process. These advances tend to be described as high upfront fees, and also the requirement to change payment processors and/or buy new equipment from the provider. They also may have high "holdback" or daily payment rates that represent a real burden for many companies.
For most cases the active commercial lenders because of this specialized form of commercial funding are limiting working capital loans to businesses that are current in their debt payments and are showing a net profit (according to recent financial statements). If these two conditions are met, new commercial loans can frequently be obtained to refinance lines of credit and term loans which have been cancelled or recalled by many loan companies. For businesses not qualified for commercial financing using both of these requirements, you will discover alternative funding sources for example business cash advance programs.
Many small business owners also count on personal lines of credit to finance some of their business operations. There are already many reports of widespread cancellations and reductions of these lending programs also, especially those involving loan companies which have received a multi-billion dollar cash infusion from United States of America taxpayer money that was intended to facilitate the lending of money to businesses and consumers.
Personal and business lines of credit have been eliminated in lots of cases by loan companies as a result of a reduced capability to pay by borrowers and deteriorating business conditions. As reported within the Working capital Journal, a high number of borrowers, however, had a good payment history for many recent line of credit reductions or cancellations.
In the meantime, there are banks ready to make working capital loans. The most significant examples are (for the most part, anyway) not banks that have received bailout funds. Generally speaking, these commercial loan companies have been ready to provide working capital financing, either in the type of new business financing or refinancing lines of credit and term loans that have been recalled or cancelled by other lenders.
Since it basically indicates that bailout funds are already given (so far) to lenders who primarily have a history of making bad loans (practically all lenders receiving bailout funds to date), the lending activities described above are a serious concern to many observers. At this point, little attention has been given to loan companies with a healthy balance sheet in federal attempts to get additional funds into the hands of consumers and businesses.
This leaves many retailers in the unfortunate position of going with a merchant cash advance from their credit card processing company. These cash advances for working capital are often billed as "convenient" and "unsecured" ways for owners to get "quick cash". The truth of the matter is, most cash advance companies do secure their loans via a UCC filing against the business. While it may not be within the owners personal credit, for many small retailers, having a UCC filing against their business is just not much different. It's a lien that is placed on the business until the advance is repaid.
What is usually left out is the fact that cash advance companies are not regulated by the government as loans. Consequently they're free to charge rates of interest, or factor rates, of 50% or higher. Even on a short-term working capital loan, this is an amazing amount of interest. Regularly, because it isn't a true loan, the MCA company has the choice of changing the rate anytime during the repayment process. These advances tend to be described as high upfront fees, and also the requirement to change payment processors and/or buy new equipment from the provider. They also may have high "holdback" or daily payment rates that represent a real burden for many companies.
For most cases the active commercial lenders because of this specialized form of commercial funding are limiting working capital loans to businesses that are current in their debt payments and are showing a net profit (according to recent financial statements). If these two conditions are met, new commercial loans can frequently be obtained to refinance lines of credit and term loans which have been cancelled or recalled by many loan companies. For businesses not qualified for commercial financing using both of these requirements, you will discover alternative funding sources for example business cash advance programs.
Many small business owners also count on personal lines of credit to finance some of their business operations. There are already many reports of widespread cancellations and reductions of these lending programs also, especially those involving loan companies which have received a multi-billion dollar cash infusion from United States of America taxpayer money that was intended to facilitate the lending of money to businesses and consumers.
Personal and business lines of credit have been eliminated in lots of cases by loan companies as a result of a reduced capability to pay by borrowers and deteriorating business conditions. As reported within the Working capital Journal, a high number of borrowers, however, had a good payment history for many recent line of credit reductions or cancellations.
In the meantime, there are banks ready to make working capital loans. The most significant examples are (for the most part, anyway) not banks that have received bailout funds. Generally speaking, these commercial loan companies have been ready to provide working capital financing, either in the type of new business financing or refinancing lines of credit and term loans that have been recalled or cancelled by other lenders.
Since it basically indicates that bailout funds are already given (so far) to lenders who primarily have a history of making bad loans (practically all lenders receiving bailout funds to date), the lending activities described above are a serious concern to many observers. At this point, little attention has been given to loan companies with a healthy balance sheet in federal attempts to get additional funds into the hands of consumers and businesses.