Small Business Failures Up 48%

The number of small businesses going bankrupt jumped by 48 per cent over the last 12 months according to Dunn & Bradstreet. More alarming is that small business start-ups fell by 95 per cent over the same period.

Dun & Bradstreet's analysis found that across the economy, business failures were down 10 per cent on the September quarter 2011, but up more than 40 per cent for the year. This coincides with Dun & Bradstreet's downgrades during the December quarter of more than 128,000 firms that are likely to experience financial distress over the coming twelve months.

According to Dun & Bradstreet CEO, Christine Christian, business failures have trended steadily upwards since 2008, growing over 30 per cent in the last three years.

You'll notice in the D&B supplied graphic that the segment of MCA-target market (businesses with less than 20 employees) has seen the greatest hit in business failures.

Key findings of the D&B Business Failures and Start-ups Analysis for the December quarter 2011:

• Nationwide, insolvencies rose 42 per cent year-on-year while the number of new businesses fell 11 per cent over the same period;
• Small business failures grew 57 per cent over the year among firms with less than five employees and 40 per cent over the year among firms with six to 19 employees;
• Small business start-ups among firms with less than five employees fell 95 per cent in the year;
• Start-ups during the December quarter in the manufacturing, service and finance sectors fell by nearly 100 per cent.

This type of data will continue to keep the big banks out of the small business financing arena. Which is good for Merchant Cash demand. However, if a current client or agent selling the MCA product, you have to be concerned with the stability of your current MCA funding company. A few recent failures/reorganizations by a some mid-sized funding companies are just the start of more to come.

Ask the difficult questions of your funding partner? What is their source of funds? What are their delinquency rates? How long have they been funding for? The more experience, the better the funding company is at measuring risk and pricing across their portfolio of contracts for long-term profitability and sustainability.

If you sense you're getting the run around when asking the above, you better start running in the other direction!

As always, American Finance Solutions is here to fund our clients and ensure our resellers/partners are always compensated!

2012 Outlook For Merchant Cash Advance

2012 is definitely shaping up to surpass 2011's record sales pace. Not only will the demand continue, according to the latest market surveys we expect it to increase dramatically. The latest Wells Fargo/Gallup Small Business Survey conducted in January shows that small business assessments of the US economy grew to its highest mark since before the financial crisis hit in 2008. Most importantly this renewed optimism coincides with other improved economic news, such as lower jobless claims and higher equity markets.

Strengthening revenues, both in the current and future expectations of business owners will greatly influence small business's upcoming decisions about investment, hiring and most important for us financing. While a net percent of companies reported a decrease in capital expenditures over the past 12 months, the gap has been narrowing.

Specifically, small business expecting to hire mew employees over the next year jumped from 15 percent to 22 percent, while the number of small business expecting future employment to decrease fell to its lowest rate since the 2007 recession began. FYI, our MCA client-base, businesses with less than 50 employees account for nearly half of the total expected employment!

The other factor that will drive demand is the Federal Reserve's renewed commitment to keep the cost of borrowing at record lows for all of 2012. This means almost guarantees that traditional lending will continue its severe constriction. Many expect the Fed to keep rates low through 2013 and even into 2014.

For 2012 we'll have the best of both worlds with the same supply constraints of 2011 coupled with drastically increasing demand. If you thought 2011 was a good, hold on because 2012 will be great!

As always, we look forward to funding all of your deals, and a prosperous New Year.