Eyeing the Merchant Cash Advance from Another Perspective

As most savvy small business owners already know, the key to doing good deals is to look at the exchange from both sides of the table. Understanding what the other guy is trying to get will give you key insights into how the deal will affect you both. Case in point--the merchant cash advance. This form of venture capital funding is not relatively new, but many invoice-driven start-ups are reluctant to test the waters. Let's look at it from the MCA purchaser side.

How They See You
AdvanceMe,Inc.'s white paper on responsible MCA arrangements sheds a great deal of light on how merchant cash advance operations view potential business partners. Their number one concern is risk management (same as yours). And they determine the risk your business poses through 'credit card sales volumes, gross volumes, time in business, SIC codes, business information, references and credit reports'. What can you learn? Having these statistics ready when you come to the table will streamline the process and show the potential purchaser that you know what is expected of your business.

MCAs are also interested in protecting you from over-selling your invoices, eventually leading to a potential shortage of cash. They know your margins and won't buy more than you’re capable of bringing in. Another important point--merchant cash advance parties that you can trust won't allow you to overextend yourself.

How You See the Deal
The Green Sheet's article on merchant cash advances highlights the growing interest that PO purchase organizations are drawing now that traditional lending sources have become stringent. Says The Green Sheet: 'Unlike a loan with a fixed rate of interest, amount due and set due date each month, with credit card advances the money is paid back as credit card receivables come in.' This is especially helpful for business that experience seasonal cash flow issues, where the ebb and flow of profits can control the amount of money repaid.

Business Loans Demystified: The SBA and an FAQ

The Small Business Administration seems to be shooting itself in the foot with respect to its 8(a) business loans programs. Due to the agencies own limitations, many small business hopefuls don't even know about the program. Those that are aware of it really don't understand how the program will benefit their situation. And that's a shame because the program itself could be a lucrative source of venture capital funding.

The SBA Could Do It Better
According to Sharon McLoone, small business writer for the Washington Post, the SBA's 8(a) Loan program has a good heart but terrible communication abilities. The program was designed to help small firms gain access to federal contracting opportunities. In fact, the federal government is supposed to appropriate 23% of its total contract dollars to small businesses, a goal they have yet to achieve.

Some of the issues that have been identified as challenges with 8(a) include:

• A general lack of understanding about the program's purpose and requirements
• An SBA staff with the diminished ability to conduct business development activities
• An inefficient process of terminating firms
• A lack of routine program surveillance reviews

How to Borrow from the SBA
The Small Business Association is still a solid option for garnering the capital funding you need to get your business off the ground. Here's how to get the ball rolling with the SBA.

Documentation. Purpose of the loan, history of the business, financial statements for three years, schedule of term debts, aging of accounts receivable and payable, projected opening-day balance sheet, lease details, amount of investment in the business by the owners, projections of income, expenses and cash flow, signed personal financial statements and personal resumes.

Submit. All materials to a local lender first. If they’re unable to extend a commercial loan offer, ask if they can pass your information to the SBA under the loan guaranty program. This will meet your needs up to about 85% of your original request.

The Merchant Funding Chronicles: From Start-up to Profit

New Internet companies break every day. The global reach of the Web can literally transform a passive idea into passive income in matter of weeks. But entrepreneurs get muddled at the start with some key concerns. When should I create a business identity? Where will I get the merchant funding to get my concept off of the ground? Those that don't answer these challenges are just surfing. Those that do become tomorrow's cyber elite. Here are some ideas to help you hurdle.

To Be, Or Not To Be...A Registered Business
According to Los Angeles-based entrepreneurship and small-business writer Karen E. Klein, operating a business with the intention of making a profit is the primary definition of whether you are running a business or a hobby. The IRS will use this definition to determine whether you can legally deduct business expenses for tax purposes. For those whose efforts are turning a profit, the next logical step is to obtain merchant funding and expand.

It's also the point where you'll want to start keeping your personal and business accounts separate. It's always a good idea not to co-mingle funds. That means a new bank account, credit cards, and books for your business. Reminds Klein: 'As a sole proprietor, you wouldn't be operating illegally if you kept your personal and business funds together, but why start your company off on the wrong foot?'

Merchant Funding Sources: Traditional and Alternative
Small business owners are expanding their minds with respect to business funding. They're examining a variety of merchant funding sources and partnerships in order to give their businesses the best start possible. Christine Comaford, CEO of business accelerator Mighty Ventures, rattles off a list of small business funding opportunities that you will want to consider.

• Bank and SBA Loans
• Personal Loans
• Unsecured Loans
• Micro-Loans
• Merchant Cash Advances
• Asset-Based Lending
• Equipment-Lease Lines
• Venture Capital
• Angel Investment
• Government Grants

When Unsecured Business Loans Go Bad: Grabbing the Life Vest

A whirlwind economy and hesitant consumers have combined to form one of the worst retail seasons in recent memory. Those small business owners who are struggling with their unsecured business loans are facing a stark decision: close their doors or work with a business debt counselor to right the ship. Here are some things that Buzzle suggests you can do to keep your unsecured business loans in check.

1. Finding A Commercial Debt Professional. As easy as scanning the newspapers or searching the Internet. Many professional debt relief companies have connections witht he major search engines and will appear without much looking. Checking with your local Chamber of Commerce is another great way to find a reputable outfit.

2. Getting Your 'Stuff' Together. The process of dealing with your unsecured business loans is trying enough. Don't lengthen the time by showing up to your appointment without the necessary documentation. That means having all loan information, business reports and asset information.

3. Know What Can Be Reorganized. According to Buzzle, not withstanding interest in real property or belongings, 'nearly every other kind of financial obligation is the result of unsecured business loans such as those regarding credit cards, electricity and heat bills, and supplier's bills can be subject to the debt reorganization process'.

4. Be ready to Negotiate. Your debt relief professional with work with your creditors to arrive at the most favorable repayment terms of your unsecured business loans. Even if these accounts are seriously over due, have gone into collection or have already resulted in creditor obtained judgments against you and your company, you are entitled to negotiations to keep your business, and yourself, solvent.

Dissecting the Merchant Cash Advance: Is it Viable? Is It Valid?

Accounts receivable- and invoice-heavy businesses will, at one point in time or another, be faced with the decision: merchant cash advance or not? Do I sell my shares of future profits for the immediate capital funding I need to expand my product line, to enter new markets, or to grow my sales force? There are positives and negatives with the merchant cash advance that should be considered for every business entity and model.

Are Merchant Cash Advances Viable?
A Reuters article aptly captures the attitude of many business owners considering a merchant cash advance partnership: 'The practice can be a lifeline for a small business to cover their costs in the near-term. But the trend is making some who watch over the health of small businesses in their communities nervous.' Why nervous? Perhaps the main reason is that, as traditional lenders are tightening their belts, the flood of small business owners to alternative commercial funding sources is offsetting the natural balance. However, those in the cash advance business see the shift as a natural flood of clients to an ingenious lending model.

Are Merchant cash Advances Valid?
As you might expect, federal, state and local regulations are quick to define the proper merchant cash advance transaction. Particularly as it compares to a commercial loan. Says Transaction Trend: 'Whether a cash advance is a loan or a sale depends on the intentions of the parties. The fact that the signed agreement says the transaction is a sale is irrelevant in most states. In order to be a purchase and sale transaction, the cash advance provider must assume some risk other than the typical risk in a loan transaction (risk of non-payment) and must treat the transaction as a sale."

Examine your proposed merchant cash advance. Are the terms and conditions in line with the law and your company's ability to repay? Answering these two questions will go a long way in ensuring your business loan positively impacts your business.

Timid Commercial Loans Send Small Business Owners to Local Banks

Despite the fact the economic times are slowly righting themselves, business owners are finding lending institutions with tight purse strings. In fact, CNN Money points out a deciding fourth quarter to be played out before we see and real relief. However, Ocala reports that small business owners are having a much better time securing commercial loans from local area banks. It seems as thought one needs the other more now than ever.

Commercial Loans in Stormy Weather
It seems as though the Federal Reserve is just about the only gung-ho lender in a skittish market, big businesses and banks are quickly finding out. Despite the fact that several key indicators are pointing in the right direction, few other sources for venture capital funding are following the Feds lead.

And it doesn't look as if the uneasiness to lend to big business will abate any time soon. According to CNN Money, 'The fourth quarter is the most critical period for lending, as financial institutions are hesitant to lend with the risk of taking a hit to their balance sheets at the end of the year'. No doubt that the New Year will spin off the way markets perform late in 2008.

Small Business Owners Think, and Borrow, Locally
The good news is that small business owners and local community banks are striking up some beneficial relationships out of the spotlight of private companies and multi-million dollar funding requests. A drop in the request for commercial loans means potentially good opportunities for small businesses.

According to Ocala, 'The problem is, in a down economy, fewer businesses are a good risk and fewer businesses are looking for loans. For those that are, the lack of competition for loans provides an opportunity for a good deal on rates'. And this bodes well with small business owners looking for commercial loans that they, and their business, can live with.

The Toa of Business Cash: Growth-minded Practices that Make a Difference

With all of the recent talk about how tough it is to get business funding, sometimes we forget that it’s not impossible. Small businesses are finding alternative ways to get the start-up or growth capital they need to gain some momentum. And it’s what you do after you get financing that determines the direction of your business. This fact is not lost on PowerHomeBiz. They offer some key advice on making your business cash go farther.

Collect Your Payments Promptly

That means streamlining your ordering process to include all forms of payment: credit and debit cards, e-mail and fax orders, e-checks, and established third-party processors such as PayPal. Send out invoices timely and apply penalties to late accounts.

Deposit Your Payments Promptly

Checks should be deposited same day, without exception. And become an expert in your banks small business cash processes. You should know exactly how long the lag time is between a deposit and available funds.

Make Accounts Receivable Rigid

This means profiling potential customers for credit and payment history, past references, and their reputation with financial rating services (think Dun & Bradstreet). Offer cash discounts and follow-up late invoices with phone calls and e-mail letters.

Don’t Pay Too Early

This is the opposite of your collections policy. Don’t pay your bills until the latest possible moment in order to keep operating cash in your account where it will do you some good. Using business credit cards for purchases typically sets payments on a 45-day schedule.

PowerHomeBiz goes into much more detail, but the golden thread is the same. Sound business cash management practices are solid ways to increase the fiscal capabilities of your small business.

Loans for Business: Alternative Lenders Flourish in the Credit Fallout

The looming recession is gutting a once flourishing economy, and industries across the board are feeling the squeeze. Traditional banks are clamoring for repayment and threatening to eat themselves up. But according to FastUpFront, lenders that include risky, high-interest payday loans to invoice factoring, equipment leasing, and business cash advance groups are seeing a feeding frenzy.

Loans for Business with Acceptable Terms Are Scarce
TradingMarkets reports that business of every size and from every industry ‘are being hurt by a national credit crisis that has frozen lending at many banks, particularly those that were in the subprime lending market or held sizable mortgage-backed securities’. Businesses looking to make a mark in the market, expand to new markets, or just remain solvent are finding it difficult to acquire the capital to do anything.

So instead of relying on shaky credit or the promise of big sales numbers in the coming year, business are looking at their assets to create a strategy for acquiring operating capital.

Venture Capital Funding Can Be Asset-driven
One thing that small business owners are finding out is that other assets can be leveraged to find much needed liquid capital. For example, businesses that rely on invoices, accounts receivable, and other PO-based operations can enter into a factoring agreement that will generate up to 90% of the proposed asset. That’s money that can be put to use today and money that won’t come from a traditional bank any time soon.

Accounts receivable factoring is gaining momentum in the US and UK. As competition enters the market, percentages will inevitably go down and service will rise in kind.

Merchant Funding and ‘The Ripple Effect’

According to MSNBC, the collapsing columns of the country’s financial edifice will cause damage much further outside of the property lines than first expected. In fact, if businesses can’t borrow any more money to remain solvent, we’re going to see shockwaves that rattle even those with an exemplary borrowing record. The perfect storm? Perhaps. But unlike the weather, this forecast doesn’t appear to be improving any time soon.

Just Like Dance Steps in a Waltz of Doom
First, jobs will be cut. Then, companies will stop investing in each other. Finally, a surge of defaulting loans will send companies in a downward spiral. And the banks are no help. Instead of supporting the economy in a time of need, they’re turning on themselves by the boatload.

Some remarkable catalysts include:

• The Sept. 7 takeover of mortgage giants Fannie Mae and Freddie Mac, which were able to sell $12.8 billion in debt in September.
• Total nonfinancial investment-grade corporate debt issuance was only $10.5 billion in September, down from $41 billion a year earlier.
• President Bush signed into law Friday a historic $700 billion bailout of the financial

Merchant Funding Sources See Opportunity
The Denver Business Journal paints a much brighter picture. Despite the fact that ‘65% of U.S. banks said they had tightened their lending standards on commercial and industrial loans to small companies’, alternative merchant funding companies are providing venture capital funding deals typically ranging from $5,000 to $300,000. The surge towards asset-based lending might be more expensive than traditional loans, but traditional loans are proving to be scarce.