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.

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!