Merchant Cash Advances and Small Business Lending

Small Business Lending, Banks, And Why it’s Not Getting Any Easier

A familiar story around small business lending goes like this: Big banks are slow to assess small business owners, and they often view loans too risky to finance. Seeking faste approvals and easier credit standards, business owners take on alternative financing, paying higher borrowing costs for the business fast money.

There’s plenty of evidence to support that story. In the three years following the financial crisis, bank lending to small businesses worsened at twice the rate which other business lending slowed. And there is no shortage of alternative financing options—from providers of  merchant cash advances  to data-driven startup seeking to meet small businesses’ borrowing demands.

According to American Banker Mag, the 80 or so U.S. banks with more than $10 billion in assets made 46.5 percent of all small business loans in the fourth quarter of 2012, but were responsible for 66 percent of small business lending made in amounts of $100,000 or less. That large share doesn’t account for big banks’ reputed aversion to small loans. The explanation: American Banker’s Harry Terris writes that the $100,000-or-less category generally represents credit-card lending, and “has been roughly steady in a range of $84 billion to $88 billion since the third quarter of 2010.”

Beyond reaping higher interest rates than commercial loans, the appeal of credit cards is clear. They let “big banks cover a bigger piece of the market without having to involve underwriting teams,”

A reminder for Main Street borrowers who can’t get a loan but can get a business credit card: The Credit Card Accountability, Responsibility, & Disclosure (CARD) Act of 2009 created a number of protections for credit-card borrowers. Those protections aren’t standard for most business accounts, but there are reasons to believe they may become so in coming years.

So what is available to small businesses is take out cash on a credit card or try like the old days and fund your business thru Visa and Mastercard, a riskiy proposition - or obtain a merchant cash advance utilizing a portion of your businesses future sales as leverage to obtain financing today. With no personal guarantee necessary. 

If you have an interest in discussing your options contact:

Rob Olson

Merchant Cash Advance America

1-888-881-0657 ext 707

 

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