Approval Rates For MCA At An All Time High

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In the past 60 days approval rates for Merchant Cash Advances are at an all-time high. American Finance Solutions is currently running a 70-plus percent approvals for new clients. There are a couple of reasons for this.

First reason is the state of the economy and almost total lack of traditional funding. Everyone knows the last 18 months have been some of the toughest on record of business owners. Banks have tightened up their lending activities in response, but to make matters worse the banks are now left with devastated portfolios of commercial loans.

Merchant Cash Advances are filling a huge void in the market place by supplying desperately needed capital to marketplace. If you are in the business of offering MCAs, there has never been a better time to build a portfolio of clients.

A second reason has been the maturation of the MCA-industry. Now the MCA product is evolving to offer various products that fit certain business-types or situations. A good example of this has been the fixed-repayment schedule. At AFS you can choose between paying a contract as a split percentage of credit card sales or a fixed weekly or daily payment. Another product is the "starter advance" where clients are offered smaller funding amounts with quick repayment times to limit risk to the funding company. This allows clients to build lender history and graduate up to more financing and improved terms. AFS launched its FAST CASH product in this niche in August of 2009.

I firmly believe that the combination above will last for at least three more years and continue to give merchants access to capital and provide agents with strong customer service skills a chance to develop a great clientele list.

Bad Credit = No Small Business Loans

As business confidence begin to return the world of small- and medium-sized businesses, many entrepeneurs are lacking the capital to take their successful operations to the next level. A recent CNN video highlights just how severe the access to capital is.

A restaurateur who has proven he can thrive even in this challenging economy cannot find the funds he needs. Yes, he has less than perfect credit, as most successful business owners do. They boot-strap, borrow on personal credit cards, take loans from family members then work 80-hour weeks and make it happen.

This theme is occurring again and again across the country from large cities to rural areas in almost every business type. For many of these business owners a Merchant Cash Advance is one alternative financing method to take their business to the next level.

Alternative Finance Companies Here To Stay

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Business week recent wrote an article on entrepreneurs accessing alternative finance companies. You can read the entire article here. It confirms what most of us already know, banks have virtually shut their doors to all types of financing for small business! Credit lines (both secured and unsecured), equipment financing and even personal credit cards to business owners are all being denied.

The articles highlights the fact that alternative lenders, such as traditional factors, reverse equipment leasing and merchant cash advance financing is becoming the mainstream for business owners out of necessity. All of the above and more expensive than traditional bank financing since they involve the financing company taking on more risk.

As for merchant cash advance, it seems that we have finally made it out of the infant-stage of our new product and are now entering the mainstream. For our agents selling the product, now is the time to expand into new business types that have not used the MCA before and target clients with very good credit who would not have considered the product before.

Keep All Of Your Processing Residuals

The majority of agents offering merchant cash advances started with selling credit card processing services to businesses. The two products are obviously very complimentary and go hand in hand.

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As an agent selling both services you not only benefit by earning commissions on both products, often making two lucrative sales to the same client, but also by keeping the client for years. Business owners who take a merchant cash advance are prohibited from switching their processing until the contract is paid in full. If you are representing a merchant cash advance company that focuses on client satisfaction then you'll be earning commissions for a long time.

The average American Finance Solutions (AFS) client does just over seven contracts, that's a lot of renewals and residuals. With AFS, our agents completely own the processing account and all of its residuals. You are not a sub-agent earning a split of a split. However the agent must be signed up directly with one of AFS' approved processors, since not all processing will perform the collection of our clients' credit card receipts for us.

If you're new to the industry you'll want to make sure you partner up with a company that allows you to maximize your earning potential from all sources. Make sure you do your due diligence and go with a reputable processing and merchant cash advance funding company. While some may offer a big upfront bonus, it doesn't make much sense if the client only does one contract and then leaves. All that hard work for a one and done deal gets frustrating, while building a solid portfolio of processing and MCA residuals leads to a successful business.

No Business Left Behind!

In today’s credit crunch most business owners across America are feeling left behind. Most of them are telling us that with the recession in full swing they have not been able secure a loan and a new line of credit. Businesses of all sizes have really taken a beating the last 18 months with the meltdown of the global economy, the credit crunch and lack of normal revenue from their customer base. Like the US homeowner that has been unable to continue to pay their mortgages and getting behind with payments the same thing has happen with business owners. They have trouble paying rent or leases, paying their employees, purchasing needed equipment to stay open and with cash flow issues. They are having the feeling of being left behind.

American Finance Solutions (AFS) FAST CASH program was rolled out to assure that “No Business is Left Behind”. With 175 business types 100% pre-approved and another 65 business types 95% pre-approved for AFS’ Fast Cash program. The underwriting process is streamlined and inclusive for this new financing product. Now business owners can have a recent Bankruptcy, liens and a low credit score (in fact credit isn't even considered) and still get approved for FAST CASH.

The FAST CASH product is really more inclusive to those that have been really affected by the present recession. A lot of these clients are good owner-operators that have had some bad luck with not being able to pay bills on time or have had to file for bankruptcy. The FAST CASH product allows these merchants to navigate through some really tough financial times and get caught up on a few bills and get above water.

AFS will fund a business with the FAST CASH product in 24-48 hours and them qualify for between $2,500 to $9,500.

The requirements for FAST CASH financing are as follows:

1. Must process at least $4500 per month in credit cards
2. Have no current cash advance accounts open
3. AFS must obtain a landlord verification and must not be behind in rent more than one month
4. Minimum of 15 credit card batches per month

The business owners who receive the FAST CASH product are not the only ones who benefit. AFS allows the ISO partner agents to keep 100% of all the processing residuals and they also get a great upfront and back end commission on the deal. Merchants who complete three FAST CASH programs are then approved for a traditional cash advance.

SBA Writes Off $2.1 Billion In Small Business Loans

Earlier this week the Associated Press reported that our Federal government bought over two billion (that's billion with a big B) in small business loans that have gone bad (that's bad with a big B). This is quite a big jump from from the previous year where the Small Business Administration bought back $1.3 billion in bad loans from banks. For the full article please visit AP.

An analysis conducted by the Associated Press found that the time between loan approvals and loan defaults is narrowing. According to the analysis:

More than $235 million in restaurant loans have been charged off since 2007. The 2,586 restaurant charge-offs make up the largest number of defaulted loans, according to the SBA. More than 150 loans made to Quizno's franchises — worth nearly $15.5 million — have been written off since 2007.

Restaurants have been part of the core market for Merchant Cash Advances since inception and will continue to be so. With default rates like those above, even the SBA will be very wary about guaranteeing loans to restaurateurs. Obviously for our agents selling MCAs you may want to continue targeting this client base.

For those restaurants seeking funding for expansion, improvements, etc. a merchant cash advance will continue to be a feasible alternative for financing. Yes, the rates are much higher than a traditional SBA loan, but given the added risk highlighted above hopefully it is a little more understandable.

SBA's New Floor Plan Program

The Small Business Administration recently announced a new Dealer Floor Plan program to assist car, motorcycle, boat and motor home dealerships secure financing for inventory. This should help many of our clients in this business, but you have to act fast as funds may run out.

Details are as follows:

Dealer Floor Plan (DFP) Financing Pilot Program
Beginning July 1, 2009, the SBA will introduce the Dealer Floor Plan (DFP) Financing. This program offers government guaranteed loans to finance inventory for eligible auto, RV, boat (including boat trailer), motorcycle, manufactured home and other dealerships under a new pilot program that runs through September of 2010. When each piece of collateral is sold by the dealer, the loan advance against that piece of collateral is repaid and the dealer borrows against the line of credit to add new inventory. Here are some of the highlights:

* Size of the loan is $500,000 (minimum) up to $2,000,000 (maximum)
* Borrowers will receive a fee reduction as outlined in the recent changes to the standard 7(a) loan programs
* The maximum guarantee is 75% as opposed to the 90% in the standard program
* The maximum term for the DFP loan will be five years
* Loans will only be made for inventory that can be titled

For complete details visit http://www.sba.gov/floorplanfinancing/index.html