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.

Traditional Financing Gone For Small Businesses

If you own a small business and have been in the bank lately there are only two letters that you've heard. They are N and O! This recent article in Newsweek highlights the challenges that small- and medium-sized business are have in obtaining financing.

The example is a 46-year old plastic bagmanufacturing company that had solid relationship with his bank. With a company this established and marketing a core product one would think that they are a sure in for bank financing. Now imagine being a successful business that has been around for a couple of years.

Their are other options out there depending on your industry and product or service you sell. For companies that sell B-to-B a good route might be traditional factoring of their account receivables or spot factoring of just a few invoices. A manufacturer may be able to do an equipment lease back or certain piece of equipment or vehicles. Of course many service, wholesaler and retailers may be able to take advantage of the merchant cash advance.

For each of the above there are different fees and costs. All provide a low documentation, convenient alternative to bank financing. Of course the rate charged for each is higher than what you used to be able to get at your bank. Expect to pay two to four times the yield rate that the bank offers. So while access to capital is going to cost your business more than the past, its still out there for when you need it.