Alternate Finance Source

According to several recent survey’s one of the biggest challenges facing small businesses is access to capital. Since the global financial meltdown and the worst recession since the great depression most banks have develop very stringent requirement concerning small business financing. Some small businesses have seen there credit lines frozen. This action causes small businesses cash flow and inventory problems. A record number has had to close their doors. Therefore many are looking for alternate financing sources.

One of the alternate financing sources picking up momentum is merchant cash advances especially for retailers, restaurants and service providers that are consumer driven and accept credit card. Basically it works like this a merchant cash advance provides a cash advance using future credit card receivables as collateral. The provider normal review past credit card processing statements based on information the typically advances one to two month’s of receivables which helps the small business owner acquire much needed capital.

The downside to this type of alternate finances the fee’s can be very high. It is not a loan so rates and fees are not regulated like traditional financing. They buy future credit card receivables at a discount. The term is six to twelve month’s and is collected as a percentage of credit card sales. The goal is to get the business in and out as soon as possible.

This type of alternate financing can possible is good if a business cannot acquire other financing and can maintain a decent profit margin. I believe businesses should review all option and then utilize resources that minimize risk while maximize return on investment (ROI.