Tis' The Season For MCA!

The Fourth Quarter holiday season is finally upon us! Starting in October you'll begin to hear the seasonal songs in every mall across America. If you are an Agent or Reseller of Merchant Cash Advance now is the time to boost your marketing and target retailers and other merchants that benefit from the Holidays.

Banks still have their coffers shut to small business according to the Wall Street Journal and business are curtailing on spending. This will mean that the majority of MCA business will be seasonal as most businesses will be reluctant to take on new debt. Here's a couple of tips to make the most out of this opportunity.

1. When targeting these merchants, get 12 months of processing statements! American Finance Solutions will use the upcoming months for payback calculations. This will allow you to obtain pricing that maximizes funding amounts or lowers factor rates since expected payback times will be shortened.

2. Maximize Fast Cash deals! With our Fast Cash program, AFS funds in 48 hours most of the time (some deals take 72 hours since we are waiting on the merchant to download with a new processor). Now that merchants qualify for 50% of their processing average, we can use the foretasted four months going into season, rather than the previous four months.

3. Don't forget about non-retailer merchants. There are so many other merchants that benefit from the Holiday Season! E-commerce are great target market that AFS funds when established. Day spas sell tons of gift certificates! The list is endless, think outside the box and you'll be rewarded!

We look forward to funding all of your deals and filling up your stockings with cash.

American Finance Solutions Official Media Sponsor Of WSAA

American Finance Solutions is proud to announce that it is the Official Media Sponsor of the 2011 Western States Acquirers Association. This year's conference will be held at the San Francisco Hyatt Regency in Burlingame, California on September 21st and 22nd.

The two day event features the Field Guide for ISO's Seminar and tons of breakout session focusing on the future of the payments industry. Marketing with Social Media, Mobile Payments and International Markets will all be highlighted. In addition, there will be plenty of time to visit with vendors and sponsors during breakfast, lunch and cocktail sessions.

AFS will be using the venue to launch its new Agent Portal, enhanced Fast Cash funding program offering $20,000 in 48 hours for merchants without personal credit pulls and an industry first equipment-secured Merchant Cash Advance with low factor rates starting at 1.15.

Make sure you stop by and see us if attending.

Welcome To New North American Merchant Advance Association Members

American Finance Solutions welcomes the addition of five new members to the North American Merchant Advance Association (NAMAA). The recent addition increases the amount of total companies by almost 50 percent and now NAMAA includes almost all reputable players in the industry. The one lone dissident continues to be Advanceme.

Now if you're selling or marketing merchant cash advance or work for a funding company, you may be asking yourself, "What's the big deal?" There are quite a few reasons why this is significant step for the whole industry:

1. Robust "bad merchant" database - If you sell the product, the first thing NAMAA members do when receiving an application is check it against the database. This saves you and your staff from wasting time and resources on known fraud and defaulted merchants.

2. Unbiased communication lines between funding companies - All NAMAA members have made a pledge to exchange true information on merchants and play fair. So often when American Finance Solutions calls a little player for a payoff amount confirmation, we get the run around. Mean while the small funder is desperately trying renew the client immediately. NAMAA members all have a designate contact that gives the real scoop on a client (weather they were even in collections, slow pay, etc) and don't compromise the payoff process. This means if you're selling for one of the companies, you don't have to worry about losing a deal at the 11th hour.

3. Best practices are adhered to - Knowing that you represent or work for a NAMAA member company, you can confidentially market this to your clientele and assure them that you represent a reputable industry player that conducts business ethically.

I believe this marks a turning point for the MCA industry. We've have officially started to move out of the early growth stage and are also quickly beginning to move into the mainstream financial marketplace.

Again, welcome to Strategic Funding, Genesis, Merchant Advance Funding, Merchant Capital Source and Swift Capital.

Let The Second Selling Season Of 2011 Begin!

Now that the kids are back in school and Summer vacations are over, it time to gear up for the Merchant Cash Advances second selling season of the year! Historically the Spring and Fall have turned out to be the prime sales seasons and we are expecting the same for 2011.

More than ever, merchants have the upper hand over suppliers when they have cash. Many of our existing clientele are renewing to take advantage of opportunities. Many are receiving large discounts or other incentives by pre-ordering and paying in advance.

One of our retailers reported a savings of 40%. He pre-paid for this October and November deliveries and is receiving $20,000 of clothing. Given that his mark up is 100%, that means he'll generate $40,000 in sales for a total cost of $15,600 ($12,000 plus the $3,600 in factoring fees). Now that's a smart use of a Merchant Cash Advance!

Restaurants are reporting that they are getting similar concessions from their liquor distributors. Gift and novelty shops are reporting discounts of approximately 30% for pre-ordering and of course speciality toy and hobby stores are squeezing their suppliers for 30% to 50% discounts. If you're marketing and selling MCA, now is the perfect time to adjust your target market and message to capitalize on this selling season. Don't forget to focus on the right types of business and who their market demographics are as well. You want applications from merchants that have the highest chance of getting approved for funding.

At American Finance Solutions, we expect more record funding months in our busiest season. Both high- and low-end retailers should benefit the most in our current macro-economy; and be the most attractive to AFS and other funding companies. (Those with money will continue to spend at the upper-end, while the rest of us move down; and the middle retailers will really feel the squeeze this holiday season!)

Latest Experian Business Benchmark Report Confirms That We're Bouncing Along The Bottom

Last week Experian released its 2nd Quarter Business Benchmark Report. The report reveals nothing unexpected and confirms that our US business climate continues to bounce along the bottom of a recession recovery. American Finance Solutions and other MCA funders play close attention to these trends to make subtle adjustments to their pricing calculators for risk and expected pay back of contracts.

Overall most businesses became somewhat more delinquent on their debts and are stretching out their days-beyond-terms. As for relevancy to the Merchant Cash Advance was the discrepancy between business size. Large business, defined as those with over 1,000 employees, had a huge increase in delinquency. Obviously, these types of business are not MCA clients. Small- and medium-sized businesses either improved their delinquency or had a minimal decline.

The report also reports delinquency by business type. Merchant Cash Advance core business types also had minimal changes to delinquency ratings. Hospitality, retail & services all continue to show steady as she goes, with neither improvement or decline in financial health as sectors.

What does this all mean for our Merchant Cash Advance industry? The trends of increased demand will continue for the short- and medium-term. Risk to funding companies, such as American Finance Solutions, on a whole should see slight improvement. Expect smart industry players, (agents, resellers and funding companies) to aggressively capitalize on a great opportunity to build revenue and market share.

As for pricing, I expect to see little change as demand pushes up some and the continuation of low bad debt will allow funding companies to cut margins some to increase volume. The two should offset each other.

It continues to look like merchant cash advance will be a strong and viable industry to provide small- and medium-sized companies with working capital! As always, American Finance Solutions looks forward to funding all your contracts.

American Finance Solutions Launches New Franchise Working Capital Program

At American Finance Solutions, we recently launched a new Fast Funding program for franchise owners. In the first week the program has been very successful with $500,000 in funding of working capital and another $600,000 in the due diligence phase. Even better than the funding amounts has been the client reaction to the speed of funding. All contracts were funded within 72 hours of receiving contracts back from clients (with required supporting documents of course).

To qualify for the program the business owner needs to own and operate a known franchise. Be in business for at least one day, have or expect credit card processing of at least $5,000 per month, not be behind on rent/mortgage/franchiser fees for more than 30 days, not be in bankruptcy proceedings personally or for the business and have a personal FICO score over 500. So almost all franchises qualify!

Details of the funding programs are as follows:

1. Funding amounts available from $10,000 to $200,000 per location
2. Factor rates range from 1.2 to 1.35 with up to 12 month expected payback
3. Split, lock box and a fixed ACH payback are all available and are the merchants choice (of course ACH requires clean bank statements)

4. Must submit franchisee agreement with contact info, otherwise all normal documentation is all that is needed (business license, voided check, 2 months bank account statements and drivers license for all owners)

If you own a franchise and are looking for working capital at reasonable rates, please give us a call. Or if you are an agent or reseller for Merchant Cash Advance, then give us an email or call at American Finance Solutions to learn more about becoming a partner.

Which Businesses Agents Should Target In An Economic Downturn

As our economic times get more challenging again, the demand for the Merchant Cash Advance product and other alternative sources for working capital will see great increases in demand. If you are selling the MCA product its a great time to seize this opportunity and build your client portfolio. The key will be targeting the right clients that will have the highest chance of getting approvals from American Finance Solutions and other funding companies.

By crafting and targeting your marketing effort you'll greatly increase your return-on-investment for your marketing dollars. Put yourself in the funding companies shoes. Which clients would you want to put your capital at risk with?

1. Recession Proof Businesses are the obvious choice. Just a few of them are:

• Low Ticket Restaurants - People still eat out in tough times, they just go to restaurants that they can afford. The middle market (entree price of $12 to $20 will get crushed once again).
• Auto Repair - People cannot afford a new car, but will plow a few extra bucks into their current vehicle to keep it running.
• Health Care - Dentists are a great example of how medical is generally recession proof. Nothing else makes a client whip out their credit card faster than pain avoidance!
• Liquor/Tobacco Stores - Vices are usually the last thing one gives up, enough said.
• Convenience Stores - When people feel poor (or less wealthy) they'll avoid big trips to the supermarket where they outlay $200 and opt for spending $40 with frequent stops a the local C-store.
• Mini-Escapes - Day spas and nail salons thrive during these times. Instead of spending a weekend at the shore, they do a spa day for the ladies why the guys hit the links (we absolutely love funding golf courses at AFS!)

2. Established Businesses

• Obviously a business with a multi-year track record and established clientèle is much more attractive.
• Clients using funds to take advantage of opportunity of buying a competitor or taking over the space of a failed rival.
• Business where the owner also owns the real estate have much more skin in the game as compared to those that lease. At AFS our risk-based pricing gives major points for this!
• Steady sales for a client goes a long way with funding companies. A business that consistently does $20,000 a month is much more desirable than the one that fluctuates wildly.

By utilizing the above targets and executing efficiently (closing) you'll maximize the most from the current opportunity in the MCA space.

Not Just Surviving, But Thriving In Recession

Unfortunately what is bad for the overall economy ends up being good for the Merchant Cash Advance industry. When the economy starts shrinking, traditional lending sources start drying up quickly, and when available the cost goes up. That forces those that need capital to turn to alternative sources.

The political events over the past week coupled with the stock market realizing the reality of the American economy has us in store for our second dip in the waters of economic recession, in my opinion. With unemployment (true unemployment is definitely above 15% and if you want estimate under/unemployment some experts are quoting 20%+) showing no signs of recovery, government stimulus spending coming to end and definitely more foreclosures in residential real estate (and the shoe hasn't even begun to drop in commercial!); its hard to refute that the next 18 months will be tough.

The end result will be significant growth for alternative lenders with Merchant Cash Advance and its ancillary products thriving. The number one reason will be pure demand and lack of suppliers. Obviously the demand will be there just as it was in 2008 when the last recession started. However, I believe the suppliers will not come rushing in as they did previously. You need dump trucks full of cash to become a serious player in this market and if you think its tough raising money for your traditional business or hot Internet start up. Imagine going out to the capital markets and saying, "I need cash to finance working capital in the sub-prime, small-business market and oh yeah, most of my clients are sub-700 FICO with no assets."

Another reason is that MCA will thrive is that funding companies will be able to easily pass along their increased cost of capital to their clients. With a typical factor rate now being 1.32, its not that difficult for a client to swallow 1.35 at the same terms. Even if real interest rates double or triple, I expect the effects to be negligible.

The key will be the qualification and underwriting criteria that the funding companies follow. In 2008, the MCA landscape was like the Wild West with anyone who had a business getting funding. The ten major funders left, American Finance Solutions included, learned their lessons the hard way. Expect most to focus on SIC codes and business models that "make sense" in a recession. More on that in my next post.

2011 2nd Quarter MCA-Industry Statistics

Given the young age of the Merchant Cash Advance product, it is very difficult to come up with industry statistics. There are no public companies that offer the product, so data is limited to self-reporting, legal filings, etc. American Finance Solutions believes that those who provide estimates are mostly taking a shot in the dark.

One source that does seem to have a decent handle on the industry is Merchant Cash Advance Resource. Personally we would consider this the best estimate for volume of total MCA business being reported. Basically the best "guesstimate" that we know of.

For the 2nd Quarter 2011, they are reporting approximately $128M in total fundings for the quarter with a total of over $257M in fundings for the first six-months of 2011. Note: American Finance Solutions is not endorsing these numbers or know the source.

One area that appears to be is the most active firms section. I believe they are listing the actual number of fundings not the total dollar amount when ranking funding companies. Definitely Advanceme is the 800-pound gorilla, however data on all other firms is very minimal with most closely guarding their data.

You can view the 2011 2nd Quarter Merchant Cash Advance Statistics by clicking here.

Hard And Soft Fraud On The Rise!

Looking back out our application flow over the second quarter at American Finance Solutions (AFS), one clear trend emerged. Fraud submissions have tripled over historic averages. Knock on wood, AFS has successfully avoided funding any of these merchant cash advance contracts in 2011.

When classify fraud deals, we break them down into two categories: Hard and Soft. Hard fraud is when outright crooks are submitting applications for businesses that do not exist, have stolen a business' identity or a desperate actual owner has altered his financial documents to qualify for more favourable terms.

Soft fraud is when a legitimate business has submitted actual documentation, but is still not being truthful about his or her business. For example, they give false landlord contact info to achieve a good rent verification when they actually months behind on rent, present a paid in full letter from their current funding company when they still have a balance, claim to never have had an MCA when they were previously in collections with a competitor, just filed bankruptcy or conveniently forget to inform us that they just consolidated their two locations into one. The scenarios.

Thanks to the North American Merchant Advance Association (NAMAA), most of our fraud is caught upon the initial application submission. Thanks to a great database, fraud alert network and dedicated NAMAA contacts for each member company a funding company can catch fraud early and not waste personnel time on bad deals and keep their sales partners more satisfied since they do not waste their time as well. If you are a funding company, I cannot imagine putting any money on the street without checking with NAMAA. For such a nominal monthly fee you'll save thousands. In AFS, first month we saved over $200,000 in fraud deals that we may have funded.

The reputable funding companies are getting better and better each month at finding both hard and soft fraud. This is very good for the industry. As the fraud rates drop, the industries overall bad debt continues to plummet. My personal estimate is that across the board, bad debt has dropped by 50% over the past 12 months due to fraud detection. This has resulted in a significant cost savings to our legitimate clients. Now, it is not uncommon to see deals with expected paybacks with factor rates well below 1.3, this was unheard of in 2009.

If your a sales organization representing the Merchant Cash Advance product, make sure all your funding sources are with the NAMAA. You'll end up operating much more efficiently by focusing on fund-able deals. Nothing is worse than chasing documents for a week, arguing with your funding company about the validity of paperwork and only hearing a recorded verification call where the merchant is busted! Again, know your merchants well so that as a sales organization you can build a strong performing portfolio with a few funders (it will go a long way in getting special favors or pricing for future clients).

When To Confirm Competitor Payoffs?

In the Merchant Cash Advance world, paying off a competitor's advance is a somewhat common practice. On about five percent of our new clients we have to wire the funds to a competitor to buy them out so that American Finance Solutions is in first position for the credit card receivables.

The catch for our sales partners is when to make the contact with the competitor to confirm the payoff amount and payment instructions. There are advantages to calling early right when contracts are received; and waiting to just prior to funding.

When calling early, AFS risks tipping off the competitor that they are about to get bought out of a deal. If its a good, profitable client (which is most often the case) the competitor will often "instantly approve" the a renewal and offer to wire funds that day and beat our offer. Of course they can do this since on a renewal the compensation to the agent of record is much lower than the new agents upfront commission. Most of our agents prefer that we don't tip off the competition (especially for the small NY-based upstarts with less than perfect reputations) and work on getting their deal funded.

So most often we wait to the day funding to confirm the amount. Most often the competitor is a NAMAA-member and we call the NAMAA contact. (All NAMAA members have agreed to provide truthful, relevant information on clients when answering payoff questions; and its been working for the past six months with no issues that AFS is aware of). Sometimes we find out the reason that the client cannot renew is because of collections issues, fraud (altered payoff letters) or trying to get double funded on the same day by the old and the new MCA company. Of course AFS is not going to be funding clients with these situations.

Of course our sales partner is not happy, they just spun their wheels and invested much time and energy for no reward. Believe it or not, we are not happy just having wasted staff time and incurring expenses for reports, site surveys, etc. In our view though the frustration and expense lost on a few clients is worth it to not take the risk of calling early and losing the deal.

Again, though for our sales partner we cannot stress enough to know your client! Find out the funding date of their current advance and deal terms. If the contract payback amount is $50,000, they got the advance six months ago and the balance is over $30,000 there's an issue with payback. You'll end up being more productive and funding more deals!

How To Speed Up Your Funding And Avoid The Dreaded Killed Deal

As the world of Merchant Cash Advance continues to mature we are seeing that price for the product is becoming less of differentiator. Service and speed of funding contracts is quickly becoming the factor for funding companies. At American Finance Solutions we've taken significant steps by investing in systems and people to address this issue. Over the past six months we have improved this significantly by two business days with most contracts funding in under four days.

Even given all of your improvements, AFS does not control all the aspects of a deal. Both our clients and sales agents can greatly influence the speed of funding and ensuring that an approval doesn't get killed in the due diligence process. By following these two simple steps you'll greatly improve your success rate.

1. Don't Hide The Bad & The Ugly - So many times we see merchant and/or their sales agents trying to brush over some negative information about the business such as recent tax liens, being constantly two weeks late on rent or some other issue. With all the technology and tools that funding companies use such as site surveys, legal/public database aggregates, background checks, reverse phone look ups and even simple Google searches we find out about the issue eventually.

Our best sales agents (coincidentally the once with the highest compensation) present the Good, The Bad and even The Ugly on merchant's current situation. This allows us to properly structure and price a deal correctly upfront that doesn't put the client in a financial hardship, meets his or her needs, fits the funding companies risk appetite and yields enough margin to make sense for all parties. Often an inexperienced sales agent selling on price is also unaware of the Ugly. Top agents who are true finance consultants will educate their merchants to give them the whole story, that way they can present the entire situation in the best light to MCA funders to maximize approvals.

Nothing frustrates clients more than having to change terms or require payoffs of past due rent or just simple requests for tax lien payment plans at the 11th hour just prior to funding. Worse yet, when a company's due diligence staff discovers the undisclosed Bad or Ugly they start worrying about all aspects of the deal and client. The last thing the merchant or the sales agent wants to do is to turn a verification process into a Sherlock Holmes investigation adding days into the process and even resulting in the dreaded Denied stamp.

2. Have/Set Realistic Expectations - So often at AFS we receive contracts back and immediately give our Welcome Call to the merchant to confirm contract terms & payment method and inform them of the due diligence process. They are shocked that it is going to take three or four days to get their $50,000. It blows me away that intelligent business owners think that from a simple one-page application and a few bank statements that they faxed in a day ago will suffice for a company to wire them tens of thousands of dollars.

Unfortunately landlords are not always available and take a day or two to call or fax back. Setting up the collection method with a new credit card processor and ensuring that the withholding split is in place takes a couple of days usually as well (if there's a point of sale system that needs to be reprogrammed it could take a week or more).

More often than not its the weak sales agent that has promised funding the next day in order to get the deal that has created the issue. Sales agents have to take the 30 seconds to explain the process and set a realistic explanation that funding will be in three or four days and the repayment method must be in place (so download your terminals asap!) This way the client isn't blowing up the agents phone every hour, has a great experience and is happy to refer more clients since with a simple set of expectations he is delighted rather than frustrated. (Tip to sales agents especially - calling the funding company every hour to check on your deal doesn't speed things up, it actually delays it because people are using their time to talk to you rather than work on getting the deal funded).

By following the two simple steps above, both merchants and sales agents will see a dramatic increase in their funding success rate with minimal frustration.

In 2011 Banks Are Getting Tighter, Not Loser As Expected

The most recent report by the Wall Street Journal, reports that for the 1st Quarter of 2011 small business lending from banks and other institutions decreased by 8.6% for 2011 versus 2010! All the hoopla of and marketing pushes by big banks appear to be just smoke and mirrors yet again.

In fact when you drill down into the data the numbers for banks (small business' historic solution for working capital), the numbers are even worse. For business loans less than $1 million, banks reported a drop of 14% and other small lenders fell 3%.

Now if you're an established business with significant revenue (in excess of $25 million) big bank lending has actually increased. Sounds like the same old story, that banks do not want to lend the lifeblood of the American economy, Small Business, when they need capital to grow and expand their business. But as soon as a business established and cranking out cash flow they open up the coffers, but of course it has to be collateralized and with personal guarantees!!!

Its no surprise that American Finance Solutions, had a historic record June in terms of funding amount. We continue to see a steady increase in applications and funding amounts. Some of our recent fundings include a well-established retailer with an 800 FICO but no real estate and a three location auto repair facility that has been established for 12 years.

For those that sell and market the Merchant Cash Advance product, there has never been a better time to build a strong portfolio!

Small Business Sentiment Slowly On The Rise

If you sell or market Merchant Cash Advances, Insperity's recent report on small business outlook is music to your ears. Small-business owners are hiring more workers and boosting compensation in anticipation of increased business in 2011, according to the recent Business Confidence Survey released by Isperity. Of course this translates into the same businesses needing working capital to supply this expected growth and a willingness to take on financing.

In the survey conducted April 19-21, when asked how they are managing the number of company employees, 37 percent of owners said they are adding new positions (a huge gain from the previously reported 24 percent). In addition, 23 percent said that an economic rebound is under way, 40 percent expect it to occur in 2011 and 35 percent remain unsure.

While the optimism is up, the same business owners are still taking a conservative approach to employment decisions. Commissions to sales staff were down , overtime pay was only 8 percent of regular pay down from 8.9 percent in November.

This survey reflects what most of our agents and referral partners already know. Our clients outlook on the future is improving, but they are still very cautious. We are seeing this reflected in a significant increase in applications for funding. However, the requests are starting to change some. Instead of seeking maximum funding, most clients are now seeking reasonable funding amounts with reasonable rates and lower withholdings to protect cash flow.

This change is welcomed by MCA funders. With lower funding amounts and withholdings the risk is dropping rapidly with bad debt ratios falling by 50 percent in the past few months. Business owners are also having a better experience with the MCA product since they are not struggling with high withholdings and/or lack of buyers remorse from high factor rates.

The end result is building a very profitable client portfolio for both funding companies and agents for the long term as these clients will becoming back for more and more funding.

AFS Launches Risk-Based Pricing

In the Merchant Cash Advance industry the two major factors that determine pricing for clients is the expected collection time for a contract and the associated risk with the contract. As we have all seen bad debt is the main driver behind the cost of money (and also makes or breaks many of our competitors.) For 2011 AFS has just launched a true "Risk-Based" Pricing model to be more aggressive on pricing contracts for merchants. For agents that have not submitted a deal to AFS in the past three weeks, you will be quite surprised on the outcome of your next submission.

The new pricing calculator now looks at more than just expected payback period to price a deal. Many other factors are now weighed including, time in businesses, expected contract length, seasonality, industry and twenty-two other factors. In addition, the calculator also allows for our Account Executive to provide multiple scenarios pricing very quickly, making it easier to offer multiple contract scenarios across all types of variables (withholding percentages, cost, funding amount, etc.)

The result for our clients is that merchants that show greater credit worth will now receive preferential pricing. The pricing also takes into account our clients' payment track record on repeat contracts. The goal is to keep an AFS client satisfied for the long haul and loyal.

However, the largest improvement to our agents is the ability to modify their compensation stream to achieve better pricing without affecting the total amount earned on a deal. Our Account Executives can now offer pricing options moving a portion of the upfront commission to payback residual. This will be done only upon request of the Agent to be more competitive on pricing and is a great solution (instead of having to reduce commission to get a deal done.)

Bottom line is that AFS Agents are now able to customize pricing for contracts to close more deals and build a strong portfolio of clients. For more information or better yet to take advantage of this new pricing please do not hesitate to contact your Account Executive or Ray Felts, Agent Development Manager at 800-760-5516, ext 106.

Banks Finally Starting To Reach Out To Small Business

Banks across the county are slowly starting to open their coffers to small business. This is a good sign for the US economy and the merchant cash advance space. The big financial institutions always seem to lag six months behind the more nimble niche players.

While lending by the big boys continue to fall as illustrated by the graphs, it does appear that a comeback is in the works.

We've been blogging now since 3Q 2010 that demand is increasing from our merchants and believe the pace of demand will continue to grow as well. Expect the banks to have minimal impact on MCAs as they will only loan money to well established business that have assets to back up the financing. The core MCA-client base of younger, non-asset based merchants will still get the doors of the banks slammed shut, unless they have significant personal assets and near-perfect credit scores.

Below is a synopsis from a recent Wall Street Journal article of recent banks focus on lending to small- and medium-sized businesses:

• Federal Reserve said 10% of large U.S. banks reported easing loan terms for small businesses in the past three months, compared with nearly 20% for medium-size or large companies.
• The number of small-business loans and lines of credit made in the third quarter are down more than 70% from their pre-crisis peaks, according to Equifax Inc. and Small Business Financial Exchange.
• Bank of America has promised to add 1,000 small-business bankers during the next 18 months.
• U.S. Bancorp began training employees at nearly all of its 773 branches in supermarkets on how to make small-business loans and added 100 private bankers to sell loans to doctors, lawyers and other small-business owners.
• Small-business loan-approval rates at Wells Fargo “are well up” compared with early 2010 as more firms try to seize on new business opportunities rather than keep themselves afloat, said Marc Bernstein, an executive vice president at the San Francisco bank. In the fourth quarter, Wells Fargo made $4.6 billion in loans to businesses with revenues of $20 million or less, up 18% from a year earlier.
• At Huntington, bankers dedicated four straight days in January to making calls to prospective small-business borrowers. They usually zero in on them for one day a month.

We firmly believe that this activity will aid our agents and resellers in selling the MCA product as well. With banks marketing, many merchants will be more receptive to taking on debt and financing hopefully opening up the door to make a proposal. The key will be positioning and selling on value, service and speed versus price.

For the funders of MCA, we are starting to see new class of clientele that has not been anxious to get funding due to desperation. The result seems to be a more established, lower risk merchant base that has thoroughly planned for use of the funds. Which will hopefully lead to lower default rates which is good for everyone (funders, agent and the clients)!

Limitations Of The Merchant Cash Advance Product

The recent slight rebound in the United States macro-economic climate has resulted in a lot of entrepreneurs seeking working capital for their businesses. As a result of this, most smart entrepreneurs have already or are in the process of analyzing the different business cash options that are open to them other than the banks which are still on lock down for small business loans. When theses business owners do Google searches they find lots of information from the hundreds of sellers on the advantages and benefits but none on some of the limitations.

At American Finance Solutions, we like to give our clients the complete picture of all the pros and cons so that a business owner can make a intelligent decision on offers. I will try to summarize the cons and limitations which can be divided into three major areas:

1. Cost - The factor rate of a merchant cash advance is much higher than a traditional SBA or business bank loan. The primary reason for the higher rates is that the funding companies are taking much more risk with low documentation, unsecured financing and compared to conventional loans. This is also one of its advantages as the due diligence or underwriting criteria allows many more business owners access to capital. The basic market forces of supply and demand still apply to MCA financing, so it pays for business owners to shop around and find a good rate with minimal out of pocket fees.

2. Qualification - This area can be broken down into two sub-sections of qualifying for an MCA outright and how much a business qualifies for in funding. As a start up, for a businesses first location you will not be able to use a merchant cash advance because there is no sales history for the funding company to base its expected collection for credit card sales. You will need a minimum of four months credit card processing history to qualify. In addition, a business needs to have some minimum level of credit card processing volume, most funding companies require $3,000 to $5,000 per month to guarantee some form of payment.

How much a business owner qualifies for can be based on several different criteria that varies for each financing company. Most reputable companies base the amount financed on a combination of total sales, acceptable remittance rates for the businesses SIC classification and overall affordability on personal/business criteria. As always, your best bet is to negotiate the best contract that minimizes the impact of payback on the businesses cash flow. We've seen too many good business owners pushed into bad contracts that take too much from a business credit card receipts and forced to close.

3. Consistency - When applying for a business cash advance give the funding company the complete story of your business so that they can create a contract customized for the volume of your credit card receipts. After the contract is funded as a financing company we expect consistent volume for expected repayment. Due to fraud by less than honest merchants, the funding companies know that if your volume drops more than ten to 15 percent that the business owner is diverting sales and violating the terms. This results in getting black listed by the industry, unpleasant phone calls for the collection departments and usually penalties and automatic ACH payments being deducted from the business' bank accounts. Make sure you read all the find print of the contract and have all questions answered directly by the funding company! At AFS we actually prefer it when a potential client asks for clarification and understands all the responsibilities of us and them. It always results in a smooth contract and happy customers that almost always repeat.

If you business is seasonal let the funding company know ahead of time. American Finance Solutions is the specialist in providing merchant cash advances for seasonal business. We usually request 12 months of your previous credit card processing statements. This allows us to set the correct expected payback each month and then build a contract that works for both parties.

There are a few other limitations that we usually specialized to a specific industry or other factor. But the above covers 90 percent of the cons.

AFS Exhibiting At The Northeast Acquires Show

American Finance Solutions will be exhibiting this week at the Northeast Acquirers Association trade show. The event is being held January 25th through January 27th at the Grand Summit Resort in Mt. Snow Vermont.

If attending please stop by and visit our exhibit booth and learn about our new commission structures on Fast Cash contracts and upcoming participation by for co-funding your own merchants.

We look forward to seeing all of current sales agents and hopefully finding a few more.

Turning The Corner In 2011

Recently both Wells Fargo and Chase banks published their 2011 Economic Outlook reports. Both of these reports (and many others, from other respected firms) almost mirrored each other. The overall theme is that 2011 is the year that the US economy begins to turn the corner and slowly, oh so very slowly, start the path to recovery.

Below is a synopsis of both reports and the most important aspects that relate to our small- and medium-sized business owners:

• Consumer spending, representing the majority of aggregate demand in the US will benefit from a streak of positive reading by mid-2011 in the form of lower unemployment rates and rising real personal income
  
• Personal income is up 4.1 percent year-over-year compared to a decline of 2.1 percent last year at this time, so the increase in spending is not as strong as in past economic recoveries
  
• Extension of the Bush-era tax cuts and the two percent reduction in the payroll tax will spur businesses to add to their payrolls as the slow economic recovery continues
  
• Households are right-sizing their debt load and this behavior will remain persistent for many years, so much of the increase in consumer income will go to lowering debt rather than increased consumption as in past recoveries
  
• Big business is also moving forward with stalled projects, building out retail and distribution networks and supported by signs of bottoming of nonresidential construction

Most of our clients have been saying the above in their own words for the past quarter, "Hey, its starting to slowly get better." And I'm sure that most merchant cash advance funders are starting to hear the same as American Finance Solutions does from its clients' need for cash, "Hey, I've got this opportunity that I want to take advantage of...." For those of you agents selling the MCA, it may be time to change your sales approach from, "what problem do you need to fix with funding" to "what opportunities do you want to take advantage of"

AFS has started 2011 with record fundings in the first two weeks as well. Yes, its only been two weeks, but its already starting out to be great year.

Fast Start To 2011 With AFS' Fast Cash Promotion

Last year was a record breaking year for American Finance Solutions. We funded well over a 1,000 contracts and are looking to double that amount for 2011! To get the year started off right, AFS has announced a new sales promotion.

For all new merchants funded now through February 28th, 2011 on our Fast Cash contracts will earn the following commissions.

• Increased commissions of 10% on the contract purchase price


• Earn an extra 2% Commission Bonus when agents self generate their contracts through the AFS Fast Cash Portal

That is a total commission of 12%, and its all up front! No need to wait until the merchant repays to get your cash. Don't forget that all Fast Cash contracts must be set up for split withholding through an AFS-approved processor (so no ACH or lockbox collection methods) and a merchant must process a minimum average of $5,000 per month with 15 batches per month or more.

If you are already an agent or reseller and need training on the Portal to generate contracts please attend one of our training sessions. Or you can always reach out to your Account Executive for a quick refresher. For new agents and resellers that want to get in on the action please give us a call or email to discuss becoming a partner. Please note that AFS does a background check on all new agents and demands that our MCA product be represented ethically and according to NAMAA Best Practices Guidelines.