Commercial Bank Lending Contracting At Record Pace Still

Despite the decision by Bernake’s desire to “normalize” the financial system by raising the discount rate last week, it’s clear that the credit crunch is not over — not by a long shot. Remember, the discount rate is the interest charged to large banks for direct, short-term loans from the Fed. But since banks are not lending right now; the move in the discount rate is simply not that significant.

In fact, discount window borrowing by large banks has plunged nearly 80% over the past year alone, to just $14.1 billion in loans outstanding as of February 17, down from $65.1 billion a year ago! In other words, since bank lending continues to drop at an alarming rate, banks simply don’t need to borrow from the Fed at low rates. In the last two weeks alone, U.S. bank lending contracted by nearly $40 billion. That brings the year-to-date decline to $115 billion, a record -14% annualized rate.

Since the credit crunch began $740 billion of total bank credit has disappeared from the financial system from a combination of loan loss charge offs, write-downs, and decreased demand for credit. If anything, the credit contraction is actually accelerating and unfortunately for business-owners growing more widespread with:

1. Consumer loans down 12% year over year
2. Credit card balances decreasing at a 28% yearly rate
3. Commercial and industrial loans falling at a 19.3% rate

What does this mean for us in the merchant cash advance industry? Increasing demand for the product obviously (and increase in all other alternative financing such as equipment leasing, traditional factoring, etc.) It also means that a new a whole new class of clientele will be seeking out an MCA. We are rapidly seeing clients with high-credit scores and well established business inquiring for funding. In the past, these clients would have secured a credit line or signature loan in a matter of days from their bank. The key of MCA companies and those selling the MCA will be to service this new clientele. They expect a higher level of customer service and integrity. For those that are willing to expend the time and energy to deliver the service, the rewards will be great.

AFS Announces New FAST CASH Finance Program

American Finance Solutions (AFS) is excited to announce upgrades to its FAST CASH financing program for small- and medium-sized businesses.

Starting Monday, February 8th AFS will be offering business up to $20,000 in financing within 48 to 72 hours without credit checks. As long as the businesses meet a few qualifications such as:

• In business for six (6) or more months
• Process a minimum of $5,000 per month in Visa/Mastcard/Discover and Debit card transactions and batch a minimum of 15 times per month
  
• Not more than 30 days behind on the business' lease or mortgage
• Do not have a current merchant cash advance
• Do not have pending or open bankruptcy for the business or any business owner
  

and can get approved with an AFS-partner credit card processor they are approved!

Initially, each business will qualify for 20 percent of its credit card processing volume with a minimum amount of $2,500 and a maximum of $20,000. After successfully completing merchant cash advance contract each business will be eligible for additional financing amounts to a maximum of $60,000.

For more details you can visit us on the web at FAST CASH or to learn more about becoming a partner for AFS-partner to offer our financing service please visit our Partner Page.