Working capital loans for today's retail businesses are increasingly hard to come by. While there will be much talk regarding helping "main street" within the media and politics, the reality is that the most cost effective working-capital for business is definitely an SBA or Bank loan. Unfortunately, the restricted credit environment in 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 in the unfortunate position of going with a merchant cash advance from their credit card processing company. These cash advances for working-capital will often be billed as "convenient" and "unsecured" ways for company owners to get "quick cash". The very fact of the matter is, most cash advance companies do secure their loans via a UCC filing against the business. While it may not be in the owners personal credit, for many small retailers, having a UCC filing against their business just isn't much different. It's a lien that's placed on the business until the advance is repaid.

What is often left out is the fact that cash advance companies are not regulated by the government as loans. This means they may be free to charge interest rates, or factor rates, of 50% or higher. Even on a short term working capital loan, this really is an astounding amount of interest. Generally, because it is just not a true loan, the MCA company has the option of changing the rate anytime throughout the repayment process. These advances will often be seen 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.

In many cases the active commercial lenders because of this specialized type of commercial funding are limiting working-capital loans to businesses that are current within their debt payments and are showing a net profit (determined by recent bank 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 for example business cash advance programs.

Many small business owners also rely on personal lines of credit to finance several of their business operations. There happen to be many reports of widespread cancellations and reductions of these lending programs as well, especially those involving loan companies which have received a multi-billion dollar cash infusion from United States 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 several cases by lenders as a result of a reduced ability to pay by borrowers and deteriorating business conditions. As reported within the Working capital Journal, a high number of borrowers, alternatively, had a fantastic payment history for many recent bank line reductions or cancellations.

Meanwhile, there are actually banks ready to make working capital loans. The most significant examples are (for the most part, anyway) not banks which have received bailout funds. On the whole, these commercial loan companies are already ready to provide working-capital financing, either in the type of new business financing or refinancing lines of credit and term loans which have been recalled or cancelled by other lenders.

Because it basically indicates that bailout funds happen to be given (so far) to lenders 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 this point, little attention has been given to lenders with a healthy balance sheet in federal attempts to acquire more funds into the hands of consumers and businesses.