What To Do When The Bank Says No
Loan decline rates for small businesses continue at close to the ninety percent level. Small businesses have been challenged by the slow economy. Business owners have continued to invest personal funds into their businesses, getting home equity lines, refinancing mortgages, selling unproductive assets, and tapping into credit cards.
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.
Florist Shop’s Cash Flow Gap
Everyone loves to get flowers. Flowers can say “Thank You”, “Get Well”, and “I Love You”. Flowers make special occasions sparkle; what’s a wedding without flowers? It’s those special occasions that keep a florist profitable. In between the special occasions though, business is slow, and many florists have trouble paying their bills.
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.
Restaurant Cash Flow Solution
Restaurants Have a High Failure Rate
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:
| October | November | December | |
| Beginning Cash | $10,000.00 | $5,000.00 | ($10,000.00) |
| Cash In | $50,000.00 | $40,000.00 | $70,000.00 |
| Expenses | $55,000.00 | $55,000.00 | $55,000.00 |
| Ending Cash | $5,000.00 | ($10,000.00) | $5,000.00 |
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.
Quick Business Loans for Gas Stations
The Challenges of Owning a Gas Station
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.
Five Reasons Why A Merchant Cash Advance Is Better Than A Bank Loan
There’s been a lot of discussion over the past decade about merchant cash advances, and whether or not they are better than a bank loan. Small business owners who use the advance as a financial tool say that they do so for the following five reasons:
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.
HVAC Quick Business Loan
Cash flow in the HVAC business is like a roller coaster. Business is driven by the weather, and who can predict the weather? When the weather doesn’t cooperate and cash gets tight, HVAC business owners can benefit from a quick business loan.
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.
Renovating on a Budget
So you’ve got your business cash advanceto finance your business renovation. You’re already excited because the funds were completely unsecured and you were able to get them in only seven business days. Plus, your flexible repayment plan will allow you to optimize your customers’ credit card payments, making your business cash advance payments virtually unfelt.
Now, it’s time for the dirty work, finding great furniture and other renovation items, for a great price. You’ve already made a great business decision with your business cash advance. Use the following information to keep up the good work.
Wholesale
If renovating an office space with multiple desks, chairs, etc. buying wholesale may be a great way to save money. Lots of wholesale sites will offer discounts for those who buy in bulk. There are even wholesale sites that offer discounts on single items.
Recycle
Renovating used office furniture is a great way to save money on a business renovation. You can reinforce and repair broken and/or damaged pieces. You can also change the color and/or style of used items. Doityourself.com offers great tips on reusing old furniture and furniture parts.
Overstock
If a company makes or buys too much of a certain item, or if an item is made incorrectly (wrong color/model, etc.), they often sell it to others for hugely discounted prices. Therefore, if you don’t want to buy wholesale, buying from places and websites that sell overstock items is another great option. Overstock.com is one of the most popular overstock websites.
Funding By Any Means Necessary
The current lending environment has prompted small business owner to shed their old ways of simply relying on banks for business funds. Now entrepreneurs are using the same drive, creativity and ambition used to create and run their businesses, to carve out new roads towards business funding.
Microloans
As stated in a recent allbusiness.com article, “Microcredit originated in the Third World as a way to help poorer people launch very small businesses. But now thousands of U.S. entrepreneurs are turning to microcredit as an alternative to traditional lending.” The article notes some of the key benefits of this type of loan to be; business training (microlenders are required to offer training to small business owners receiving the loans), flexible requirement, the ability to build credit and the significantly less amount it time it takes to receive a microloan in comparison to a typical bank loan.
Counting on the Future
Some small business owners are literally banking on their futures. “Through an online marketplace called the Thrust Fund, the three have offered up a percentage of their future lifetime earnings in exchange for upfront, undesignated venture funding,” (Inc.com). The entrepreneurs are offering 6 percent, 3 percent and 3 percent of their future earnings in exchange for $600,000, $300,000 and $300,000 in upfront cash. Some small business owners don’t agree with this method of business funding. Still, others feel that it may be worth it, to get their businesses going in the direction they want.
Business Cash Advance
The business cash advance is yet another type of business funding that small business owners have been increasingly using. It gives entrepreneurs the chance to get up to $500,000 for their businesses and it comes with a variety of benefits:
- Unsecured
- Minimal requirements
- Flexible repayments
- No restrictions on usage
- Renewal options
*Have you used an alternative funding method to get funds for your business?
You Know You Need a Business Cash Advance When…
We’ve all heard the jokes… “You know you’re from California when…” or “You know you’re old when…” You may have even copied and pasted them into an email and forwarded them to 100,000 of your closest friends. But did you know that there are some dead giveaways for determining that you should be looking into a business cash advance instead of a bank loan? Some small business owners are insistent upon getting a bank loan, but in this economy, many of them should be searching for a bank loan alternative, as their chances of qualifying for a bank loan are slim to none. If you’re a business owner, reading the following list will give you a good laugh and guide you in the direction to receive up to $500,000 in funds for your business (without getting a bank loan).
You know you need a business cash advance when…
- Your weight is higher than your credit score.
- The bank asks for collateral and you ask if your employees will suffice.
- You think a fixed monthly payment is the payment plan for your dog’s neutering.
- The bank says the process will take several months and you reply “I’ll be out of business by then.”
Get a free online quote today!
SBA Loans: Are they Worth it?
A recent allbusiness.com article speaks of Dr. Donna W. Woo, a 2002 medical school-graduate who hoped to get an SBA loan to help her open her first medical practice. She then realized that actually getting and SBA loan wasn’t as easy as she thought it would be as, “…landing an SBA loan turned into one of the toughest full-time jobs she has ever experienced.”
The following four key points played the biggest roles in making her SBA loan experience so tedious and time-consuming.
- It took three months
- She put together detailed spreadsheets (showing her projected income month by month and year by year over a five-year period)
- She wrote a thick business plan laying out the past, present, and future of the overall chiropractic market.
- Completed a vast amount of SBA forms (often two or three times each)
And this was before the onset of the “Great Recession.”
Based on the findings of Discover Card and independent research firm, Ramussen Reports, 61 percent of surveyed business owners said they’d be “not very likely” or “not at all likely” to apply for an SBA loan.”
So, if small business owners don’t want SBA loans, what do they want? Or better yet, what other options do they have? When comparing the steps that Dr. Woo took in 2002 to get her SBA loan to the steps that must be taken to get a business cash advance, it’s practically a no-brainer.
- You can get your funds in as little as seven business days
- The only documentation needed is 1) an application 2) the last four months of merchant statements 3) a copy of the business lease 4) a copy of your driver’s license and 5) a voided business check
- There is no business plan required
- The application is only two pages
Granted, the business cash advance is not a sufficient funding method for startups (you must have owned your business for at least six months), but there is a multitude of merchants who have owned their businesses for six months or longer and could greatly benefit from a merchant cash advance of up to $500,000. In fact, in the allbusiness.com article, Dr. Woo says that since she’s opened her business, getting an SBA loan is “not something she’d ever do again,” as she has patients to deal with and simply does not have that kind of time.
For small business owners who want to save time and finally get the cash they need for their businesses, the merchant cash advance is definitely an option to consider.
