Financing For Small Businesses-options If You Don't Accept Credit Cards

Financing For Small Businesses-options If You Don't Accept Credit Cards

By:


The last two years have been a long road for those entrepreneurs seeking loans for small businesses. Many firms have seen their bank lines canceled or withdrawn in the face of restrictive underwriting regulations and the unwillingness of banks to lend despite the amount of cash the government has made available.

The first best choice for any business is an SBA 7a loan. This is the most versatile loan that the SBA currently guarantees and is designed to meet a variety of business purposes. The new law passed by Congress was designed to help the amount of these loans available by raising the government guarantee against default to 90% of the funded amount for many types of businesses. The unfortunate reality for many businesses is that many banks and non-bank lenders are not lending or approving loans, even with increased government support. Because the SBA does not actually make any loans, but only guarantees them against default, the final lending authority rests with the bank. The government cannot force them to make loans.

Businesses who are in need of replenishing their working capital or in need of getting a small business loan have largely been abandoned by traditional large banks. As confidence in the small business sector has waned, few lenders have the know-how to underwrite and effectively manage default risk in today's uncertain environment. In some cases, credit unions have stepped in to fill the vacuum with a more member-centric approach for those businesses that are in their member base. Usually, the rates and terms of these loans are extremely competitive compared to to most of the sources of capital.

Another choice for businesses is the merchant cash advance that is marketed by different payment processors as well as merchant cash advance companies. This option has the advantage of being able to handle a variety of credit situations. This type of capital is not a true business loan, but rather, an 'advance' on future credit card receivables purchased at a discount to their actual value. An example would be a company "advancing" $75,000 and collecting back $100,000 worth of credit card revenue. As you can see, the effective interest rate is 25%. Because cash advance loans are not regulated as true loans, there is usually no upward legal limit on the amount of interest they can collect, unlike a traditional business loan. In many cases, merchant cash companies will charge rates as high as 50% and require a company to switch their credit card processor.

Luckily, there are new cost effective and flexible options available for businesses that use credit cards, or operate on a cash basis, or a combination of both. While no one size fits all lending option that is perfect for every scenario, businesses should take the time to consult with an expert prior to making any move. Any type of business company finance is a lasting decision that can have permanent consequences, and should be taken with great care, even if the situation is urgent.

About the Author:
Neal Coxworth is an entrepreneur and a 17 year veteran of the consumer credit industry with experience in originating, underwriting and processing mortgage, student and consumer credit loans.

IF YOUR BUSINESS NEEDS WORKING CAPITAL NOW, CLICK BELOW:

http:businessworkingcapitalloans.com



Article Originally Published On: http://www.articlesnatch.com


Tags: , , ,

|

Loading...
Related....
Videos...

Recent Loans Articles

Comments

Still can't find what you are looking for? Search for it!

Loading

Site Navigation:

Copyright 2005-2011 ArticleSnatch, LLC - All Rights Reserved.
Privacy Policy | Terms of Service.