Loans for Business: Credit Cards Looking Less Favorable Still

What can small business owners expect with respect to credit card lending in the coming years? How about 20% less credit--a drop of $1 trillion-- by 2010. In fact, if the current trend continues, the ability of companies to utilize loans for business to fund operations and establish safety nets could be seriously hampered. Here’s why.

Ever-tightening Standards Leaves CEOs Bewildered
According to CreditCard.com’s small business news forum, the latest Federal Reserve survey results paint a bleak lending picture. Credit card borrowing continues to be the toughest avenue for businesses to navigate, particularly in the first three months of 2009. Over 60% of all banks surveyed revealed that they instituted stricter requirements on approvals and repayment in reaction to a sluggish economy.

Even Credit Card Reform Leaves Out Small Business
The latest Senate session was dubbed “a great day for consumers” after congressmen voted to reign in on unexpected fees and soaring rates. The problem? Small business owners were astonishingly left out of the regulatory good will. The Truth in Lending Act only offers protections to consumer, while companies must continue struggling to keep heads above water. And with over 74% of small business owners using credit cards for day to day operations, that’s a great deal of paddling.

So What’s a Small Business to Do?
WTHR Indianapolis offers several suggestions for businesses left out in the lurch. One idea that’s gaining popularity is the use of nontraditional lending vehicles. Merchant cash advances, factoring and equipment leasing are three ways to use the internal resources of the business to generate operating income. And in most cases, these alternative loans for business are void of such difficulties as minimum monthly payments and annual percentage rates.

The Food Industry Shows Signs of Rebound; Restaurant Financing Sure to Follow

Despite a perilous past year, the restaurant business is finally showing signs of life. More people are eating out, and more establishments are opening. Here’s a brief synopsis of the turn-around, plus how the recovery will improve financing options for aspiring owners.

Activity in the Industry is Encouraging
Several key indicators in the restaurant industry are encouraging, relays the Advance Restaurant Financing blog. For example, the National Restaurant Association’s comprehensive index of restaurant activity is showing an increase for the third straight quarter. Also, the U.S. Traveler Sentiment Index rose in February 2009 from October 2008, according to a February TravelHorizon’s survey.

Restaurant Financing is Possible
Banks and other lenders are giving more consideration to restaurant opportunities simply because it’s the type of business that stimulates the economy. A National Restaurant Association press release reinforces the notion that restaurants generate jobs and careers. With 2009 sales forecasts strong and the demand for employment opportunities at its highest point, financers realize that green-lighting restaurant financing vehicles is the right thing to do.

MCAs Enter the Equation
For those that can’t get restaurant financing, merchant cash advance opportunities abound. Vendorseek recommends MCAs for businesses that do heavy receipt volumes, such as restaurants and retail stores. Money is ‘advanced’ the business up-front for a portion of monthly sales. It’s also an ideal financial vehicle for stores that experience a seasonal ebb and flow of sales, allowing them to avoid minimum monthly payments and outrageous APRs.

Merchant Cash Advance Financing Goes Under the Microscope

The credit crunch is on and alternative financing models are under scrutiny. The merchant cash advance is being touted as the invoice-driven businesses’ answer to expansion financing. But is it really worthy of so much attention? Here’s the 411 on merchant funding and why you should take notice.

Not a Loan, So Credit is Not Typically an Issue
Vendorseek explains why a merchant cash advance arrangement beats traditional lending hands-down. First, because the vehicle is based on future credit card sales, credit scores aren’t as much of an issue. Past sales are more important; so a company with a history of strong transactions has a good chance. Also, because there’s essentially no money being loaned, the business doesn’t have to worry about APRs or minimum monthly payments.

Who’s Keeping Watch Over the Industry
The merchant funding industry has operated largely unregulated since its inception. This might scare some businesses that are used to accountability and monitoring. However, the North American Merchant Advance Association reports that the feds have taken an increasing interest in these transactions and are pushing for transparency. In fact, the NAMAA is focusing on fraud in an effort to clean up the trade and bring in new clients.

How to Evaluate an MCA
According to BusinessWeek, understanding and comparing the terms are everything. In the early days, businesses attracted by the prospect of no monthly minimums often signed at exorbitant rates. However, new contract language has forced MCAs to be upfront with their terms, making comparing offers infinitely easier. And, as always, the Better Business Bureau is still a quality contact for additional info on potentials vendors.

Unsecured Business Loans: Sterling Credit Required for Loans by Signature

If you’re a budding CEO or considering launching a new business venture, a term you’re sure to hear is unsecured business loan. Many lenders will promise the world, but very few will give you the low-down on one of the toughest forms of business financing to secure. So here it is.

Just What is an Unsecured Business Loan?
Acout.com describes an unsecured loan as a form of business financing that requires no collateral. It’s sometimes referred to as a signature loan, because your signature is all that’s required to close the deal. It’s also one of the highest forms of lending risk that a bank can assume. That being said, your credit and repayment history must be above reproach. And that’s just not the case for most borrowers.

So What are the Alternatives?
Business Credit Services, Inc. offers two popular, albeit unorthodox, forms of business financing that you can consider beyond the unsecured business loan.

• Equipment Sale Lease Back. This obviously only works for established businesses. Business equipment is sold to the lender and then leased by to the company. Cash is immediate, repayment is gradual.
• Merchant Cash Advance. Primarily for receipt or invoice-driven businesses. Lenders advance cash on future sales.

For those interested in the Merchant Cash Advance, Vendorseek reveals that this form of business financing is coming out of the dark with respect to regulation and oversight. New federal guidelines have made the merchant cash advance even more attractive.

The Commercial Loans Nightmare and How to Avoid It

Believe it or not, there are several options for starting or expanding a business outside of applying for commercial loans. And that’s music to the ears of many entrepreneurs and CEOs. Commercial loans have been taking a hit as of late. Here’s what you need to know.

Commercial Property Loans Forecast Bleak
Recent news from Reuters doesn't paint a flattering picture for commercial loans in 2009. A perfect storm of lack of credit, falling property values and reduced cash flow is making acquisition and repayment of these financing vehicles difficult at best. What’s more, faltering values will continue to pressure businesses who can’t mean loan-to-value ratios on loan apps.

If You Have Equity--Use It
For those who have commercial property already, using the existing equity in the property just might be a way to fund growth. According to Jeff Rauth, President of Commercial Finance Advisors, Inc., those who are looking to pull cash out of an existing mortgage can go the equity route without such bothers as appraisal, title, or environmental fees.

Getting Ready to Apply
For some business owners, commercial loans will be their only option. If that’s the case, Vendorseek offers a comprehensive list of pointers to keep in mind before you apply. Strategies such as applying to several lenders, keeping accurate balance sheets on hand, and consulting the Small Business Administration (SBA) can significantly improve your chances of uncovering a loan with terms you can live with.