Working capital loans for today's retail businesses are increasingly challenging 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 definitely an SBA or Bank loan. Unfortunately, the restricted credit environment through which we find ourselves means the majority of these loans are not being approved for the retail businesses that need them most.
This leaves many retailers within the unfortunate position of going with a merchant cash advance from their credit card processing company. These cash advances for working-capital tend to be 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 owner funding just isn't much different. It is a lien that's placed on the business until the advance is repaid.
What is usually left out is that cash advance businesses are not regulated by the government as loans. It means that they're free to charge interest rates, or factor rates, of 50% or higher. Even on a short-term working-capital loan, this really is a staggering quantity of interest. All too often, since it isn't a true loan, the MCA company has the choice of changing the rate anytime through the repayment process. These advances tend to be viewed as high upfront fees, and the requirement to change payment processors and/or buy new equipment from the provider. They additionally may have high "holdback" or daily payment rates that represent a real burden for many businesses.
In the majority of cases the active commercial loan companies due to this specialized type of commercial funding are limiting working capital loans to businesses that are current in their debt payments and are showing a net profit (based upon recent financial statements). If these two conditions are met, new commercial loans can frequently be obtained to refinance lines of credit and term loans that have been cancelled or recalled by many lenders. For businesses not qualified for commercial financing using these two requirements, you can find alternative funding sources such as business cash advance programs.
Many small business owners also depend 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 U.S. taxpayer money that was intended to facilitate the lending of cash to businesses and consumers.
Personal and business lines of credit happen to be eliminated in many cases by loan companies because of a reduced capability to pay by borrowers and deteriorating business conditions. As reported in the Working-capital Journal, a high portion of borrowers, alternatively, had a great payment history for many recent credit line reductions or cancellations.
Meanwhile, there are banks prepared to make working capital loans. The most noteworthy examples are (for the most part, anyway) not banks which have received bailout funds. Generally, these commercial lenders happen to be ready to provide working-capital financing, either in the form of new business financing or refinancing lines of credit and term loans that have been recalled or cancelled by other lenders.
Because it basically indicates that bailout funds are already given (so far) to loan companies who primarily have a history of making bad loans (virtually all lenders receiving bailout funds to date), the lending activities described above are a serious concern to many observers. At the moment, little attention has been given to lenders with a healthy balance sheet in federal attempts to get additional funds in to the hands of consumers and businesses.
This leaves many retailers within the unfortunate position of going with a merchant cash advance from their credit card processing company. These cash advances for working-capital tend to be 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 owner funding just isn't much different. It is a lien that's placed on the business until the advance is repaid.
What is usually left out is that cash advance businesses are not regulated by the government as loans. It means that they're free to charge interest rates, or factor rates, of 50% or higher. Even on a short-term working-capital loan, this really is a staggering quantity of interest. All too often, since it isn't a true loan, the MCA company has the choice of changing the rate anytime through the repayment process. These advances tend to be viewed as high upfront fees, and the requirement to change payment processors and/or buy new equipment from the provider. They additionally may have high "holdback" or daily payment rates that represent a real burden for many businesses.
In the majority of cases the active commercial loan companies due to this specialized type of commercial funding are limiting working capital loans to businesses that are current in their debt payments and are showing a net profit (based upon recent financial statements). If these two conditions are met, new commercial loans can frequently be obtained to refinance lines of credit and term loans that have been cancelled or recalled by many lenders. For businesses not qualified for commercial financing using these two requirements, you can find alternative funding sources such as business cash advance programs.
Many small business owners also depend 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 U.S. taxpayer money that was intended to facilitate the lending of cash to businesses and consumers.
Personal and business lines of credit happen to be eliminated in many cases by loan companies because of a reduced capability to pay by borrowers and deteriorating business conditions. As reported in the Working-capital Journal, a high portion of borrowers, alternatively, had a great payment history for many recent credit line reductions or cancellations.
Meanwhile, there are banks prepared to make working capital loans. The most noteworthy examples are (for the most part, anyway) not banks which have received bailout funds. Generally, these commercial lenders happen to be ready to provide working-capital financing, either in the form of new business financing or refinancing lines of credit and term loans that have been recalled or cancelled by other lenders.
Because it basically indicates that bailout funds are already given (so far) to loan companies who primarily have a history of making bad loans (virtually all lenders receiving bailout funds to date), the lending activities described above are a serious concern to many observers. At the moment, little attention has been given to lenders with a healthy balance sheet in federal attempts to get additional funds in to the hands of consumers and businesses.