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Home Business Loans Young Company, Thriving Business, No Credit? You Have Options
One of my best friends is a CPA. He teaches accounting to small business bookkeepers all over the country. I’ve even been through his course and learned a thing or two about small business bookkeeping from him. “Cash flow is king,” he says. “Without cash, small businesses struggle and eventually fail.”
Of course that’s no secret to every small business owner on Main Street. Growing up in a small business family, I remember times when my Dad needed to go to the bank for some working capital because cash flow was a little tight. I heard more than one conversation with his banker that went something like this, “If I had that much cash in the bank I wouldn’t need a loan.”
Access to capital is often challenging for young companies who don’t have a four or five year track record or strong credit history, even if they have a healthy and thriving young business. Nevertheless, if they have a consistent flow of credit card transactions they have an option.
A Merchant Cash Advance (MCA) is a loan based upon the volume of cash that flows through a company’s merchant cash account. A regular, predictable flow of credit card transactions could be all a young and thriving company needs to secure financing for working capital or expansion—without credit checks, a 720 credit score, or a big wad of cash in the bank.
As traditional lenders like banks and credit unions brought lending to a screeching halt in 2008 and tightened the purse strings in the years following, alternative lenders saw an opportunity and jumped into the fray. Over the last couple of years, as their numbers have increased and competition has done the same thing, the cost of capital from these lenders has started to decrease.
This is a good thing for the 90 percent of small business owners that leave the bank without a loan.
Nevertheless, not all MCA loans are created equal. Before you sign on the dotted line, make sure you do the following:
The sad reality for most small business owners is that only 10 percent of those who go to the bank looking for a loan get the financing they’re looking for. Many of the options available today for small business owners (like an MCA) weren’t available when my Dad was talking to his banker—but 2012 was a great year for small business owners willing to look into alternatives to the bank. 2013 should be the same.
Small business evangelist and veteran of over 30 years in the trenches of Main Street business, Ty makes small business best practices, tips and advice accessible by weaving personal experiences, historical references and other anecdotes into relevant discussions about leading people, managing a business and what it takes to be successful. Ty also shares his passion for small business every week on Forbes.com.
Author: Ty Kiisel | Google+
Small business evangelist and veteran of over 30 years in the trenches of Main Street business, Ty makes small business financing and trends accessible in common sense language devoid of the jargon.
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