Such actions have resulted in making small business owners even more of a risk for banks and have contributed to the high rate of turn-downs for bank loans.   Owners with maxed-out credit lines and highly collateralized property are not attractive candidates for the banks.  

Survey Says…

The high rate of bank denials has driven small business owners to look for new sources of funding.  A recent online survey of 276 small business owners indicated that 87 percent needed a predictable and readily available source of capital.  Consistently, business owners felt that funding decisions should be made on the strength of a businesses’ cash flow and not the ability to collateralize a loan.

Merchant Cash Advance Provides Funding

The survey results reinforce the concept of a merchant cash advance; cash advance decisions are made primarily on the strength of business’ credit card receipts.  Factors like high personal credit scores for the owner are not required, and funds are readily available.  

Funds Are Available Quickly

When businesses with strong credit card sales find themselves short on cash, they can get a cash advance on future credit card receipts with a merchant cash advance.  A cash advance is often a good solution because:

• Repayment is made from credit card receipts, so the payment will go up and down as sales go up and down
• There is no fixed repayment term
• No collateral is needed

In order to qualify, a business owner needs:

• $2,500 minimum in credit card sales per month
• 4 months as the current business owner
• Have a FICO score of at least 500 (better credit = more funds and lower rates)

Merchant Cash Advance Gets High Rating

Business owners who have used a merchant cash advance found that it was easy to use, and generally recommend it to other business owners.  The owner of a B & B in Texas has this to say:

“The cash advance allowed my company to expand and grow by opening another location. The payback is truly almost transparent since it is such a small percentage of our total gross revenue that is held back. I highly recommend other business owners to explore this innovative approach to securing working capital without the hassles and tedious paperwork involved with other more traditional lending sources. They get my highest rating of approval!”

A Viable Bank Loan Alternative

Business owners who are in need of a predictable and readily available source of funds who don’t want to tie up their collateral would be wise to investigate the benefits of a merchant cash advance.

 Five Good Months, Seven Slow Months

Florist shops are busiest around Valentine’s Day, Mother’s Day, Christmas, and during the month of June, when many weddings take place.  In between the holidays, business at florist shops is slow but steady: occasional funerals, birthdays, and miscellaneous gifts.  The money made in the good months must be carefully rationed in order to make it through March, April, July, August, September, October and November.

Inventory Drain on Cash

Florists must have fresh inventory, and many nurseries want to be paid on delivery, since the product is perishable.  Even when business is slow, there must be fresh inventory on the shelf; no one will buy wilted flowers.  In addition to flowers, a florist needs to buy plants, containers, boxes, paper, and other supplies. 

The Cash Flow Gap

Surviving in the floral business is not only about how much money is made, but when it is made and when it is spent.  Florists must carefully watch their inventory and cash flow so that they will have enough cash to pay the rent, utilities, and payroll during the slow months.  Having access to a line of credit is desirable, but a line of credit or a bank loan is difficult to get and generally requires collateral and a personal guarantee.  Repaying a bank loan requires regular fixed payments, which are difficult to make because business is slow most of the year.

Merchant Cash Advance Solution

Florist shops generally do a lot of credit card transactions.  When shops with strong credit card sales find themselves short on cash, they can get a cash advance on future credit card receipts with a merchant cash advance.  A cash advance is often a good cash flow solution for a florist because:

• Repayment is made from credit card receipts, so the payment will go up and down as sales go up and down
• There is no fixed repayment term
• No collateral is needed

 Florists who have at least $2500/month in credit card sales, are current on their property lease, have been in business at least four months, and have a FICO score of at least 500 generally qualify for a merchant cash advance.

Bridge the Holiday Gap

Florists who can access their future credit card receipts through a merchant cash advance will find that they have less to worry about in the slow months between the holidays.

Many would-be entrepreneurs dream of owning their own restaurant.  They imagine walking around a full room on a Friday or Saturday night, chatting with customers and giving out complimentary drinks.  They dream of having a full reservation book and a register full of cash.  Too many of these dreamers start a restaurant and fail within their first year, because they are better at dreaming than planning.  Restaurants lead the list of small business failures.  

Many Profitable Restaurants Fail due to Cash Flow Issues

Restaurant owners are frequently perplexed by cash flow; they can’t understand why, if they are profitable, that there isn’t any cash.  Let’s have a look at a basic cash flow scenario:

You start with $10,000 at the beginning of October; you take in $50,000 in sales, but your expenses come to $55,000; so you end the month with only $5,000.

You start November with the same $5,000, but you only take in $40,000 in sales and your expenses remain the same.  You end the November $10,000 in the hole.

You catch up a little bit in December because it’s the holiday season and there are a lot of people eating out.  But, what do you do about the shortfall in November?  What if your suppliers won’t extend your credit so you can buy what you need in December?  If you don’t have inventory to fix the meals, you can’t service your customers, and if you can’t service your customers, you’re out of business. 

That’s how profitable restaurants go out of business; it’s all a matter of not having cash when it’s needed. 

A Short-term Loan Can Smooth Out Cash Shortfalls

The most useful resource that a small business can have is a line of credit at a bank.  Unfortunately, banks are rarely interested in loaning money to restaurants.  Restaurants have a high failure rate, so they are very high-risk loans for a bank to make.  So, what’s a restaurant owner do when they see a cash shortage on the horizon, as in the example above?

Credit Card Receipts Are a Key Asset

Most consumers pay their restaurant checks with a credit card.  Consequently, restaurants quickly develop a substantial monthly portfolio of credit card sales.  A restaurant can get an advance against their merchant credit card account in order to compensate for future cash shortfalls.  A merchant cash advance is a valuable cash flow tool that can help a restaurant through slow sales periods.  The benefits to a restaurant owner are: 

• Re-payment of the loan is done from credit card receipts; there is no fixed payment.  When sales are down, your payment is low.  When sales are up (and you can afford it) your payment goes up. 
• No fixed repayment term
• No collateral
• Approval not based on your credit score

A merchant cash advance can take the fear and uncertainty out of cash flow shortfalls.  Restaurant owners can benefit by adding this flexible financial tool to their management toolbox.

Oil is in the news and on everyone’s mind.  Whether the news is about the latest oil spill or the cost of a barrel, everyone is talking about oil.

What most folks don’t realize is that although the cost of a gallon of gas is continually on the rise, very little of that money goes to the owner of a gas station; most of the money goes to the wholesale cost of the gas and to state and local taxes.  Gasoline is the magnet that attracts consumers to the gas station, but once there, the business owner hopes to sell the consumer something other than gas.

Profits Are In Retail

In the past couple of decades gas stations have shifted away from traditional services like auto repairs and towing.  The trend has been to convert service bays into retail space.  Gas stations have become convenience stores, and are offering coffee, sandwiches, sodas, cigarettes, candy and more.  Retail is where the profits are; a gas station makes as much profit on a super-sized cup of coffee as they do on a tank full of gas.  

Store Traffic Drives Sales

In order to make retail sales, a gas station needs lots of people walking through the door.  When the weather is bad, or when the price of a gallon of gas goes through the roof, store traffic slows down; and when it does, retail sales suffer.  When retail sales suffer, cash flow and profits suffer and the business has a hard time paying its bills.

Bank Credit Isn’t Available

Banks hate to loan money to gas stations; they see the risks as too great.  Here’s how a bank see a gas station:

• Gas stations are a cash business.  Verifying cash flow for a gas station is harder than for commercial rental properties. 
• Gas stations have perceived environmental risks and the liability associated with such risks.
• Because banks don’t know anything about running a gas station, they are unable to run the station if they have to foreclose on the loan.  All they can do is sit there and accumulate losses while they wait for a buyer.

A Merchant Account Is an Ace-In-The-Hole

Most purchases at a gas station convenience store are paid for with a credit card.  Gas stations generally have a very active merchant account.  Since credit card sales are frequent and somewhat predictable, gas station owners can get an advance against future credit card sales whenever they get into a cash crunch.

Easy to Qualify

Unlike a bank loan, a merchant cash advance is easy to qualify for.  The requirements are:

• $2,500 minimum in credit card sales per month
• 4 months as the current business owner
• Be current on the property lease
• Have a FICO score of at least 500 (better credit = more funds and lower rates)

Re-paying a merchant cash advance is easy as well:

• Re-payment of the loan is done from credit card receipts; there is no fixed payment.  When sales are down, your payment is low.  When sales are up (and you can afford it) your payment goes up. 
• No fixed repayment term
• No collateral
• Approval not based on your credit score

With a merchant cash advance, gas station owners will be able to continue to make their payroll and cover their expenses when there is a temporary downturn in business.  A merchant cash advance is a valuable financial tool for gas station owners.

No Fixed Repayment Period

No matter what kind of loan you get: mortgage, auto, or personal, there is always a fixed repayment period.  Generally, a mortgage is fifteen or thirty years, a car loan five or six years, and a personal loan three years.  Sure, you can pay it off early if you are able.  But, in the meantime, the bank has your equipment, house, or other asset as collateral.

With a merchant cash advance, you simply agree to sell a certain percentage of your credit card receivables at a discount to the cash advance provider.  The provider collects the payments directly from credit card receipts.  The time it takes to repay the advance will vary according to your credit card sales.   

No Fixed Monthly Payment

No matter what, you know that you will be making the same monthly payment to the bank every month for the life of the loan. 

Repayment of a merchant cash advance is much more flexible.  Since your sales will vary from month to month, the amount collected by the provider will vary from month to month. 

Benefits Cash Flow

The problem with making a fixed monthly payment on a bank loan every month is that there isn’t always money available to make the payment.  When business is good, and you have plenty of cash, it’s easy to make the fixed payment.  But, when sales are down, making your payment is a struggle.  If you can’t make the payment, you are in default of the loan.  Your delinquency will be reported to the credit bureau, and your credit score will be affected.  When your credit score goes down, it will affect the interest charged on your credit cards and the amount you pay for insurance.  Your ability to borrow in the future will be negatively affected.  In a worst-case scenario, the bank can seize your collateral.

A merchant cash advance is cash-flow friendly: you pay more in good months, less in slow months.  Simple.

No Interest Rate

Banks charge interest on their money.  They have lots of complicated formulas to arrive at what interest rate they will charge you.  Your creditworthiness, risk factors, collateral, and repayment term will all be considered when they decide how much interest you will pay.

Interest is not charged on a merchant cash advance; it can’t be.  Interest calculations are based on borrowing a fixed amount of money for a pre-determined amount of time.  Since a cash advance has neither fixed payment or fixed length of time, interest cannot be calculated.  Instead, a portion of a business asset – credit card receivables – is being sold at a discount.

No personal guarantee

If your business doesn’t repay a bank loan, they can come after the loan signer for the balance due.  The persons who signed the loan document: all of them; are responsible for the repayment of the loan.  Failure to repay can result in wages or bank accounts being garnished and liens being placed on homes or other assets. 

Merchants do not personally guarantee their credit card advances.  Of course, merchants who fraudulently enter into a merchant cash advance are open to prosecution.  For honest merchants who operate with integrity, a merchant cash advance is a valuable financial tool.   

There will likely still be much discussion about whether or not a merchant cash advance is better than a bank loan.  Only you can decide which is best for your business.  But for many small businesses today, the above five reasons are convincing.

Fast Cash When You Need It

A quick business loan can help an HVAC business grow and stay profitable.  The business benefits because:

• Re-payment of the loan is done from credit card receipts; there is no fixed payment.  When sales are down, your payment is low.  When sales are up (and you can afford it) your payment goes up.
• No fixed repayment term
• No collateral
• Approval not based on your credit score

Easy to Qualify

A quick business loan through a merchant cash advance is easy to qualify for.  The requirements are:

• $2,500 minimum in credit card sales per month
• 4 months as the current business owner
• Be current on the property lease
• Have a FICO score of at least 500 (better credit = more funds and lower rates)

A merchant cash advance can take the fear and uncertainty out of seasonal sales fluctuations.  HVAC companies can benefit from adding this flexible financial tool to their management toolbox.

Plan for the Slow Season

Summer will be hot: an HVAC business will service more air conditioners and sell more A.C. equipment.   Winter will be cold, and HVAC field technicians will spend their time repairing furnaces.  In the Spring and Fall, it’s anybody’s guess what the weather will be like. A successful HVAC contractor who recognizes the cyclical nature of his business can keep his business running smoothly no matter what the weather with a quick business loan.

Prepare for Equipment Breakdowns

It’s important to keep funds available for servicing your equipment.  Nothing impacts revenue more than having a full service schedule and having a truck break down.  You can’t just go out and rent a fully-outfitted HVAC service truck.  A merchant cash advance can get you back on the road quickly.

Bid on Big Contracts

Big contracts mean big profits, but they also mean a large initial cash outlay for the contractor.  A quick business loan allows you to buy the equipment and supplies you need without stretching your credit limits or getting behind in your bills.

Invest In Growth

Getting a bank loan to grow your company is often difficult.  Nine out of ten small business loans are turned down by banks.  You know how it is: you have to prove you don’t need the money before they will lend it to you.  A merchant cash advance is easy to qualify for and can provide your company with the money it needs to grow.

A Valuable Tool

How well an owner runs his business during both the busy season and slow season can mean the difference between success and bankruptcy.  It’s important not just to maximize revenue in the busy season, but to manage cash well so that there will be some funds available to pay bills during the slow season.  A quick business loan through a merchant cash advance can be a valuable tool for the owner of an HVAC business.

You’re Not Wal-Mart

Large retailers seem to have it made.  They rotate their stock seasonally and always have something to sell.  They don’t need a merchant cash advance; their cash flow is steady.  But, what if you own a ski shop that’s slow all summer?  Or a bike shop without much traffic in the winter?  You still have to pay the rent, the utilities and the insurance.  Every three months, the IRS is going to come knocking on your door wanting your quarterly tax payment.     Unfortunately, the IRS and the utility company won’t take bicycles or skis in payment for taxes or electricity.  They want cash.

Penalties and Interest Add Up Quickly

Making sure that you have enough cash to pay your payroll taxes, sales taxes, and estimated income taxes takes careful planning.  In some states, merchants who miss a sales tax remittance face fines of up to 25% of the tax due.  Missing a Federal 941 payroll tax remittance is serious, indeed; the IRS takes aggressive action and may garnish your checking account.  The specialty retailer who doesn’t stay on top of these taxes will be out of business in short order. 

Frustration at the Bank

Banks like to say that have money to lend, but if you’re a small businessperson you know better.  Banks don’t do inventory or floor-plan financing, so your inventory is no good as collateral.  A merchant cash advance is out of the question; banks won’t do a merchant cash advance.  You may qualify for a business line of credit if you can demonstrate at least two years of profitability, but be prepared to get financially naked in front of the loan officer.  To get a line of credit you’ll have to supply all your financial records and tax returns for up to five years.  For such a loan the bank may also require co-signors, collateral, UCC filings, and direct withdrawals from your checking account to make the payments.  

Think Strategically with a Merchant Cash Advance

You’ve been in business long enough to understand the seasonality of your sales.  You know when sales will peak and when they will bottom out.  You have established a track record with your merchant account and you can pretty well predict what your MC/Visa charges will be from month-to-month.  During your off-season when cash gets tight, why not capitalize on your future credit card receipts with a merchant cash advance?   

Another Tool in your Financial Toolbox

A merchant cash advance is a valuable financial tool that can help your business grow and stay profitable.  The benefits to a Specialty Retailer are:

• Re-payment of the loan is done from credit card receipts; there is no fixed payment.  When sales are down, your payment is low.  When sales are up (and you can afford it) your payment goes up. 
• No fixed repayment term
• No collateral
• Approval not based on your credit score

A merchant cash advance can take the fear and uncertainty out of seasonal sales fluctuations.  Specialty Retailers can benefit from adding this flexible financial tool to their management toolbox.

Recycle

• Start a company-wide recycling program
• Encourage employees to recycle bottles and cans (turn them in for money)
• Take old electronics to stores that offer “electronics recycling” programs.

Reduce

• Avoid using paper whenever possible (send emails, make phone calls, etc.)
• Purchase energy efficient light bulbs
• Encourage walking and/or riding bikes to work for employees that live close enough and carpooling for employees that live further

Reuse

• Repair broken equipment and/or furniture
• Find new uses for old items

Cash Register

“Thanks to a host of new applications, businesses can process credit cards without using dedicated wireless devices or clunky terminals, which can cost anywhere from $200 to $2,000. All you need is your cell phone,” as stated in the inc.com article, “Say Goodbye to the Cash Register.”

Desktop Computer

Desktop computers used to be a staple in any small business, but now they are being replaced by laptops, iPads and even smartphones.

Land Line

With plans that offer unlimited nationwide calling and internet access for less than $100, land lines are becoming less and less necessary for small business owners as well as the general public.

 Key Points from Article

• In 2008 and 2009, large banks that received government bailouts actually cut lending to small businesses.
• At the 22 largest banks to receive government bailouts, average small business loan balances fell 4.6% between April and November of 2009.
• Originations for new loans slid by 7.4%.

Although government lending to small businesses may not be up to par, small business owner still have other options available to them.

The merchant cash advance makes it possible for small business owners to get up to $500,000 in business funds, which can be used without restrictions.  Merchants who meet the following minimal requirements can have funds wired into their accounts in as little as seven business days.

-          Processes at least $3,500 in monthly credit card sales

-          Haas owned business for at least six months

-          Has no unresolved bankruptcies

-          Has at least one year remaining on business lease