Working capital loans for today's retail businesses are increasingly tough to come by. While there is much 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 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 within the unfortunate position of going with a merchant cash advance from their card processing company. These cash advances for working-capital will often be billed as "convenient" and "unsecured" ways for business people 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 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 which 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 through the government as loans. Consequently they are free to charge interest, or factor rates, of 50% or higher. Even on a short term working-capital loan, this is an astounding quantity of interest. Regularly, because it is just not a true loan, the MCA company has the option of changing the rate anytime through the repayment process. These advances tend to be characterized by high upfront fees, as well as the requirement to switch 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 companies.
In the majority of cases the active commercial loan companies for this specialized type of commercial funding are limiting working capital loans to businesses which are current in their debt payments and also 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 loan companies. For businesses not qualified for commercial financing using both of these requirements, you will 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 have been 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 U.S. taxpayer money that was intended to facilitate the lending of cash to businesses and consumers.
Personal and business lines of credit are already eliminated in many cases by lenders because of a reduced capability to pay by borrowers and deteriorating business conditions. As reported within the Working-capital Journal, a high portion of borrowers, alternatively, had an excellent payment history for many recent line of credit reductions or cancellations.
Meanwhile, you will find banks willing to make working-capital loans. The most significant examples are (for the most part, anyway) not banks that have received bailout funds. In general, these commercial loan companies have been willing to provide working capital financing, either within the type of new business financing or refinancing lines of credit and term loans which have been recalled or cancelled by other lenders.
Since it basically indicates that bailout funds have been 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 this time, little attention has been given to loan companies with a healthy balance sheet in federal attempts talking to acquire more funds into the hands of consumers and businesses.
This leaves many retailers within the unfortunate position of going with a merchant cash advance from their card processing company. These cash advances for working-capital will often be billed as "convenient" and "unsecured" ways for business people 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 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 which 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 through the government as loans. Consequently they are free to charge interest, or factor rates, of 50% or higher. Even on a short term working-capital loan, this is an astounding quantity of interest. Regularly, because it is just not a true loan, the MCA company has the option of changing the rate anytime through the repayment process. These advances tend to be characterized by high upfront fees, as well as the requirement to switch 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 companies.
In the majority of cases the active commercial loan companies for this specialized type of commercial funding are limiting working capital loans to businesses which are current in their debt payments and also 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 loan companies. For businesses not qualified for commercial financing using both of these requirements, you will 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 have been 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 U.S. taxpayer money that was intended to facilitate the lending of cash to businesses and consumers.
Personal and business lines of credit are already eliminated in many cases by lenders because of a reduced capability to pay by borrowers and deteriorating business conditions. As reported within the Working-capital Journal, a high portion of borrowers, alternatively, had an excellent payment history for many recent line of credit reductions or cancellations.
Meanwhile, you will find banks willing to make working-capital loans. The most significant examples are (for the most part, anyway) not banks that have received bailout funds. In general, these commercial loan companies have been willing to provide working capital financing, either within the type of new business financing or refinancing lines of credit and term loans which have been recalled or cancelled by other lenders.
Since it basically indicates that bailout funds have been 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 this time, little attention has been given to loan companies with a healthy balance sheet in federal attempts talking to acquire more funds into the hands of consumers and businesses.