As the economic times worsen, it is becoming more and more difficult to get a loan for business. Most businesses would use their primary lifeline, the bank, in times before this avenue was all but closed because of highly constrictive underwriting and more difficult approval standards. As all these things changed with the bank, many businesses suffered negative credit ratings caused by the economic crunch.
When these business owners failed to get a loan for business, they had only a few options other than things like borrowing from those close to them. Some took out equity loans out on their home, but many were forced to accept merchant cash advances from their credit card processing company.
These advances are unregulated and not real business loans. Legally they are “cash advances” which allows the provider to charge any kind of inflated interest they wish. These rates are also may be subject to change at any point during your repayment period on this advance. It is common for these advances for businesses to carry an effective rate of interest of over 50%.
These merchant providers will charge large upfront fees as part of the contract for you to receive funds. These merchants will also demand you switch credit card terminals and service providers. These advances are advertised as “non-credit based” and “unsecured”, it is relevant to know that regardless of these factsadditional resources they do many times file a UCC or uniform commercial code lien against the applying business.
What that means is if you are to ever sell your business while this is in place, the advance providing company will have legal rights to the proceeds of that sale before the business owner will receive any payment.
There is now a much better way to get a loan for business and get some capital soon, even if you have poor credit. That new type of loan is called a CCRF or credit card receivable financing and is characterized by:
- These interest rates are 50-80% LOWER (on average) than merchant cash advances.
- You will not have to switch credit processors for your cards.
- No need to get new terminals installed.
- No fees upfront.
- Owner score can be as low as 550
- You can get a maximum loan of up to $500,000
- This is a regulated loan for your business that builds good credit and is subjected to state regulation over maximum interest rates.
- Get approved within 48 hours and Funded in 7 days.
Today’s environment for business is difficult. Businesses now have a cost-effective way to get a business loan even if they are suffering under the dual burden’s of lower customer traffic and less working capital options.
Neal Coxworth is an entrepreneur and a 17 year veteran of the consumer credit industry with experience in originating, underwriting and processing mortgage, student and consumer credit loans.