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.