Merchants Choose a Merchant Loans Alternative

Every three months, the Federal Reserve Board conducts its Senior Loan Officer Opinion Survey on Bank Lending Practices. According to the summary of the April 2009 survey, released by the FRB, the latest survey addressed changes in the supply of, and demand for loans to businesses and households over the previous three months.

“More than 40% of banks surveyed said they had raised credit standards for commercial and industrial loans to small firms (under $50M in revenue) in the last three months…” writes John Tozzi, in his article for Business Week. “This is the 10th straight quarter that a net percentage of banks has reported tightening credit to small firms.”

Tozzi also notes that more than 60% of banks said demand for C&I loans for small businesses had fallen over the past three months. “Banks attributed this in particular to decreased investment in equipment, as well as less need for financing inventory, accounts receivable, and acquisitions,” writes Tozzi. Nevertheless, a surge in the awareness of merchant loans alternatives, such as the merchant cash advance, may play a tiny role in the demand decrease.

Bank lending has slowed dramatically over the past year-and-a-half, but this doesn’t mean that small business owners’ needs for business funds has decreased. They’ve just had to look to alternative sources to get the funds they would normally secure through a bank. “It is interesting to see during this recent business credit crunch that the average credit profile for a merchant cash advance applicant is on the rise,” wrote the president of a merchant cash advance company, in his blog last October. “We have seen a plethora of FICO scores in the 700s and even 800s which typically first seek traditional bank loans and credit lines before seeking alternative funding products such as a merchant cash advance.”

The merchant cash advance has served as an excellent alternative for small business owners during the credit crunch for various reasons. First, eligibility requirements for merchant cash advances are much less rigid than traditional bank loan requirements. Typically, a merchant who has owned his/her business for six months or more and processes at least $3,500 in monthly credit card sales can be approved for up to $500,000. Furthermore, the process of receiving a merchant cash advance is rather fast, allowing borrowers to have their business funds in as little as seven business days after they complete and submit their applications.

The credit crunch has no doubt, spurred difficult times for countless small business owners, but it has also raised awareness of a very effective alternative to traditional merchant loans. Now, merchants understand that they have options and even when bank lending standards begin to loosen, small business owners have the option to choose the merchant cash advance when they need fast cash.

Merchant Loans Alternative
The merchant cash advance is an excellent alternative to the traditional merchant loan.

Tags: Alternative, Choose, Loans, Merchant, Merchants