If you're considering taking out a merchant cash advance (and why on earth are you reading this blog if you aren't?), then the chances are either that you've been turned down by your bank, or that you didn't bother applying because you knew that you'd be turned down.
And that's frustrating. Because, according to a December report from Experian, a company that provides credit references, small businesses are currently the best credit risks. In fact--although it's not quite a straight line progression--as a general rule, the smaller the business the better the risk.
Small Business Loans Are Low Risk
The report shows that, during November 2009, the average risk score for small businesses with fewer than 20 employees was 59.53, which makes them the most creditworthy of all groups. By contrast, companies with 1,000 employees or more scored a scary 34.14.
And of all the dollars owed by those small businesses just 15 percent were overdue. That compares with 23 percent for enterprises with 1,000+ employees.
What's the Problem?
The trouble is, banks are hoarding their (or, arguably, our) money, and refusing commercial loans to small businesses. The government recognizes the problem, but seems powerless to act. Last March, Timothy Geithner, Secretary of the Treasury, said in a speech:
Banks ObdurateAcross this country, tens of thousands of small business owners are finding it harder to get the credit necessary to stay in business. Credit is essential to economic recovery, and we need our nation’s banks to go the extra mile in keeping credit lines in place on reasonable terms for viable businesses.
The government of the United States has put in place extraordinary protections for the banking system, so that banks can continue to benefit from low costs funds, and so that they have access to the liquidity they need. We need you to put that assistance to work for the American economy.
But, as you know only too well, very little has happened since Secretary Geithner spoke, nearly 10 months ago. And way too many American entrepreneurs with viable businesses are facing impossible trading conditions--and even bankruptcy--because of inadequate small business funding.
Merchant Cash Advances Offer a Way Forward
Merchant cash advances can offer an immediate source of working capital to those whom banks turn down. Of course, as with any borrowing, it's important to find the right lender, and understand fully what the loan terms involve. But more and more people are turning to this source of very fast business funding.
If you'd like to find out more, you can get up to five merchant cash advance quotes here.
2 comments:
MCAs look even better after the Feds began overhauling the system. Recent legislation has created compliancew standards for MCA agreements that didn't exist before. The best part is that the legislation protects both the MCA vendor and the client in many respects. Banks may be the second options for many business that deal in receipts.
MCAs also beat small business loans for companies the rely on seasonal business. Retail stores that do a windfall during Christmas can secure yearly operating capital and pay the flux when their coffers are full.
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