Latina Business Owners Exploding!

American Finance Solutions has always had a very strong presence in the Latina community. Being in Southern California, with a high concentration of Latina businesses, we know how important and vital this client-base is to our business.

The U.S. Census Bureau statistics show Latinas are starting their own businesses at six time the national average. From 1997 to 2006, the number of Latina-owned firms increased by 121%. What is significant is that Latina business owners have quickly moved beyond the local restaurant and markets. At AFS we have seen significant strides that Latina owners are making in manufacturing, business services and retail.

What is important when marketing and servicing your Latina-client base, is doing it on their terms. Roughly 50% of our latina-client base, prefers to communicate in their native Spanish-language, even though they speak perfect or near-perfect English. So if you have this skill set as an agent, you're already half way home to the sale.

In addition, our Latina-clients are extremely loyal and honest. If you take care of your Latina-business owners, they will take very good care of you with continual repeat business and an almost endless supply of referrals. If you charge bogus fees, overcharge for equipment, hide ancillary prices; they will quickly leave and not be shy at all in telling all their friends and fellow business owners.

At American Finance Solutions, this target market has the lowest default ratio; making them very attractive to finance! In addition, Latina-business owners often do not have a strong banking history with traditional financial institutions; making the merchant cash advance product a perfect fit for them.

Light At The End Of The Tunnel

It appears that the light at the end of the tunnel for small business is now insight (and the good news is that it is not a train heading towards us!). The National Federation of Independent Business recently announced its Optimism Index for October 2010. The good news is that the index increased from Septembers 89 to a 91.7.

What is significant about the number is that is a move in the positive direction, and a rise of nearly three points is significant. Unfortunately its not a large move. The index averaged above 100 points for the five years before the recession and has been sub-93 since January 2008, to give you reference points.

Small business owners are acknowledging that the most is behind them and we are slowly starting to recover, see some limited growth and a little optimism. Most though agree that their is light, but the tunnel is very, very long. The announcement also stated the only seven percent of business owners thought it is a good opportunity to expand and grow; and 73 percent reporting that now is not the time to grow.

We at American Finance Solutions, firmly believe that the next two to three years will see slow consistent recovery with some bumps along the way. This slow growth has definitely started and we see it with the increased demand in our merchant cash advance product line up. Good news for us and our agents is that the grow will continue at a nice pace.

Economic Stimulus: Success Or Failure?

Often we hear from our small business clients about the State Of The Union and Washington's policies. In talking with hundreds of small business owners we have never seen an almost unanimous opinion: the Obama Administration's economic strategy is a failure!

The current consensus is that the economy is not growing fast enough to produce jobs and there is little recovery in sight. Most are deeply concerned that the budget deficit will remain in excess of $1 trillion for years to come, putting the U.S. into a deeper fiscal crisis. What is most frustrating to are clients is that neither party has a realistic plan to start solving the problem. It seems doomed to only get worse.

Obama's Administration believed that with a temporary stimulus the economy would revert back to a state similar to pre-financial crisis and counted on the personal savings rates going back to the 3% range of disposable income or less and new housing starts recovering to the $1 million unit level. They believed this approach would give the needed economic shot in the short term to stabilize markets, which would be followed by increased personal spending which would restore growth.

Unfortunately the Administration didn't see the true macro economic drivers of the crisis. Consumers had hit the debt-wall from years of over-spending, while years of neglect on the US critical investment needs such as infrastructure, and energy had been neglected. The US has been losing its long-term competitiveness, hidden behind all the growth in consumer consumption that was creating jobs and a middle class in China.

So what happened was the savings rate has doubled to over 6% and of course housing starts barely creep along above the half-a-million units per year. The US economy needs much more than a temporary stimulus fix. It needs a structural change which is taking place by natural market forces. More savings equals more investment into the critical components the US needs to stay competitive.

All of American Finance Solutions' clients agree, that its going to get worse before it gets better. They all are ready to bite the bullet and have had a lot of practice over the past two years in surviving the storm. They want the needless spending stop and start having Washington make investments for the long-term, not for the political flavor of the day, even if it means serious sacrifices in the short-term, including another recession.

AFS Joins The North American Merchant Advance Association

American Finance Solutions is proud to announce that we joined the North American Merchant Advance Association (NAMAA) this month. NAMAA is a not-for-profit trade association representing the organizations in the US and Canada that offer working capital advance products based on credit, debit and other electronic payment-related revenue streams to small- and medium-sized businesses. The goal of NAMAA is too shape our Merchant Cash Advance industry by providing leadership, education and sharing of information.

With MCA being an alternative financing product for businesses, it is often seen by traditional lenders as a high-risk, expensive and questionable product. Reality is that the Merchant Cash Advance is a fairly priced, un-collateralized business financing that fits its niche in the marketplace. During the infancy of the product in the early-2000s, the product was and sometime continues to be sold incorrectly. The NAMAA recently set Best Practices Guidelines to ensure that all funding companies and agents represent and sell the product properly.

American Finance Solutions has always adhered to these Best Practices since our first day of operation over five years ago, since they are the proper way to do business. For those that do not know the Best Practices, they are six key elements:

1. Provide Clear Disclosure Of Fees

2. Provide Clear Disclosure Of Recourse

3. Be Sensitive To A Merchant's Cash Flow

4. Adhere To Proper Marketing Materials Disclosure

5. Monitor Resellers Of The MCA Product

6. Proper Payoff Of Outstanding Merchant Cash Advance Balances

In addition, NAMAA members all contribute to fraud prevention on both the client and agent side of the business to protect members from unscrupulous individuals. American Finance Solutions looks forward to contributing to the NAMMA organization and helping shape a strong MCA industry that continues to prosper in the future.

Forecast For Small Business Default Rates Dropping

The Stanford University Business School was announced their forecast of default rates on small business loans. Based on analysis of PayNet data the default ratio is expected to decline from 4.6% in 2010 to 3.9% in 2011.

Since 2006 the average rate of small business has averaged 6.9%. This means that small businesses in general are defaulting on their obligations less. Merchant Cash Advance funding companies are also see their default rates drop at approximately the same ratios. As compared ot 2008, the default ratio has dropped by 1/3 and looks likes the trend is continuing.

This drop has allowed MCA companies to do a couple of things:

1. Agressively price quality contracts, with a lower bad debt; funders can offer lower factor rates

2. Write deeper in their portfolio, again with the lower factor rate we can afford to take risks on some contracts

3. Offer contracts with longer expected repayment terms, as the we push out the timeframe risk increases

2011 is shaping up to be a record year for the entire industry. With falling bad debt, banks still siezed up and total lack of liquidity in most other alternative financing products, the MCA is becoming a viable alternative for almost all merchants.

If your marketing MCA their has never been a better time to build your book of business!