Merchant Cash Advances Aren't Cheap. But What Capital Is?

Loans for Business All But Disappearing from the Mainstream

Last week, this blog mentioned a CNN Money report that small business loans from mainstream banks had been cut by a billion dollars in October, 2009. But what wasn't--but should have been--said here was that the CNN piece went on to talk more about business funding:

The 22 banks that got the most help from the Treasury's bailout programs have decreased their small business lending by a collective $11.6 billion since April, when the Treasury began requiring them to file monthly reports. The banks' total lending has fallen 4.3% in that six-month period, to $257.7 billion.

So, all those tax dollars that the big banks hoovered up in bail-outs have benefited, er, the big banks--and nobody much else. No wonder small entrepreneurs can't find the business funding they need.

Merchant Cash Advance: Not for Every Business

Back in August, AdvanceMe, Inc. published a white paper entitled 'Merchant Cash Advance: Not for Every Business. Is it Right for Yours?'

AdvanceMe describes itself as 'the nation's leading provider of Merchant Cash Advances to small and mid-sized businesses' so you might expect this to be a self-serving document. And it certainly isn't beyond criticism. But it also makes some good points.

Small Business Loans Aren't Cheap Anywhere

Of course, merchant cash advances (MCAs) are expensive. But if mainstream bank loans are rarer than hens' teeth, then what's the alternative?

The AdvanceMe white paper gives a few examples of when it makes sound business sense to sign up for an MCA after your bank has turned you down, or when its loan application processing is too long-winded. Here are two:

1. Your nearest competitor goes bust, and you have the once in a lifetime chance to buy up its stock for next to nothing. Do you pass up that chance--and lose real money--because you're not prepared to pay MCA rates?
2. You own a restaurant somewhere very hot and steamy, and your air conditioner finally packs up. Do you close down while you wait for your bank's small business loans department to get its act together (or, more likely, to change its lending policies so you qualify), or do you find a lender who wants to do business with you?

Speaking of lenders who want to do business with you, you can merchant cash advance providers all over the web. Why not start here?