by Mark Finkelstein
Since the recession in 2007-8, options for small business owners to obtain standard bank financing have significantly narrowed. Even if a traditional bank is willing to consider financing in any serious way, it will require collateral that is equal to or exceed the amount loaned, personal guarantees that may include a spouse and take over a month to review an account. The truth is that a business owner with less than stellar credit or other blemishes on their financial histories will be effectively shut-out from traditional financing.
A second option is to bring in an equity partner to secure additional capital. This process is more difficult than traditional bank financing because the pool of investors for a small business is exceedingly small. Private equity firms are out of the reach for all but a small minority of small businesses. Further, the amount of ownership in relation to the investment that may be offered will be impossible to objectively evaluate. The sweat equity an owner has invested in their business is rarely, if ever, given sufficient credit in negotiations. It will always come down to where the business is today and where will it be going in the future.
Fortunately for small business owners, they have more options than they might realize. A cottage industry has grown into an accepted and tested source of ready capital for small businesses. Direct funding companies provide small businesses with access to immediate capital, at times, in less than 24 hours. Funding is based on the strength and consistency of the business’ monthly and daily cash flows. Poor personal credit scores are not hurdles for these products, nor is the type of industry or geographic location. Funding can be arranged with as little information as an application and submitted bank statements. Once a track record is established, access to ready capital that is limited by the business’ cash flow is unlimited. After their initial advance is 50% repaid, they become eligible for another round of financing, with a higher approval, better rate, or both. Over time, they can grow their financing options along with their business.
The contract that is established with a business owner will be short-term, from 3-18 months, and will be a purchase of future sales. Repayments of the funding will be established per business day or week and will include an added loading reflecting the cost of the funding. While the load on the repayment may appear to be costly, the funding provided allows the owner to grow their business, or survive an emergency, without giving-up any equity in the business. When the funding is fully repaid, the owner has a stronger business without unwanted partners. The key advantages of Merchant Cash Advance funding are clear:
Flexible and Unsecured Options