I waited to write this post, in hopes that the new year would wreak some sense out of the chaos regarding the "credit crunch" that has besieged US businesses. The information "out there" is ...conflicting at best. But you don't have to be a news junkie to get the gist - US businesses are failing at alarming rates - and cash flow seems to be a predominant issue.
Ironically, a recent article in the December 2009 issue of CFO poses the argument that access to credit is not at issue - and the "contraction in small-business credit is actually due to a lack of demand". Is this possible? The author Alix Stuart goes on to cite a survey by the National Federation of Independent Business (NFIB) in September in which only 10% of 827 small business owners surveyed said they couldn't access financing.
What's with all the bankruptcies then?
The fact remains that SBA lending between September of 2008 and 2009 was down by 35% (remember even with SBA backing - it's your bank's money being loaned). Even private investment in US small business remains markedly low when compared to recent years.
General consensus despite the naysayers remains - access to capital for todays new and veteran business owner remains negligible.
Merchant cash advance for processing merchants remains an option for access to capital. This advance is based on a merchants future credit card processing sales. Unlike a traditional loan there is no set payment amount because payments are based on a percentage of the monthly credit card sales volume and as such fluctuates with the merchants income - a big plus.
Remember some of the other benefits we've touted in our blog post - no personal guaranty, quick approval times, fast cash in the bank, etc. The drawback is typical of fast money - cash advances can be costly....but if the alternative is bankruptcy, is it worth it?
Unlike in years past, even merchant cash advance providers are taking a closer look at the merchants they work with. Merchants must show a processing history of 4 months to even a year as well as a certain monthly volume in sales, may be asked to produce an active property lease, and/or may even have their credit checked (say it ain't so! is there no end to the scrutiny?).
As a merchant account cash advance provider we don't claim to know or provide advice as to whether this option is a good one for each and every one of our very unique merchants...but we can't help but think it's a viable one - if bankruptcy is looming.
Typical merchant use for cash advance use to be things like paying taxes and remodeling, but our industry is touting new uses by their merchants with the money advanced on future sales. Not just in survival mode, merchants are using the money to refine their product lines or tweaking their brands in reaction to the marketplace.
We like this.