Avoid Your Small Business Suffering From Banks Reduced Lending

Small businesses relying on traditional loans from banks are suffering in the ongoing economic downturn. However, companies that explored alternative business financing venues have been able to avoid the tight credit markets and keep operating, and even growing, using merchant cash advances.

The Federal Reserve’s Senior Loan Officer Opinion Survey reported that 75% of the surveyed banks had made their lending standards more stringent for small businesses trying to obtain loans. As a result of lower sales and loss of credit lines and small business loan opportunities, small businesses are more apt to let go employees and cut benefits.

US Business Finance Corp has found that small businesses with Visa and MasterCard merchant accounts have been able to tap business cash advances quickly to handle short-term capital emergencies, inventory buying or meeting quarterly tax payments. Using bursts of business that various holidays bring, many merchants see their cash advances getting paid off sooner.

Merchant cash advances are alternative funding solutions where the finance company takes on the funding risk and does not demand securities or collateral. In 2008, the Small Business Administration (SBA) saw its 7(a) loan guarantee program back only 70% as many loans as in 2007. Many small businesses have found the SBA’s raised loan criteria to be just as stringent as the local banks and don’t see the need to wade through the additional paperwork only to get turned down for an SBA-backed loan.

Small businesses using personal credit card cash advances instead of merchant cash advances find themselves in a double-bind, paying high interest and lowering their credit scores in order to fund their business. The double bind initially serves to build the business and cash flow that banks want to see, but hinder later loan applications due to the lowered credit score.

With business cash advances, credit scores are not affected and payments are made sooner with the increased cash flow. Small businesses regularly use the alternative financing to set their business up for better terms with traditional financing sources.

If your small business is in need of a fast capital infusion for meeting payroll, inventory needs or cash emergencies – turn to the merchant cash advance specialists at US Business Finance Corp. Our experts are ready to help you with the fast application process and get your business back in top form.

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Filed under: Alternative Capital, Banking Industry, Business Cash Advance, National Economy