RSSFor many entrepreneurs in today’s economy it is increasingly difficult to obtain a loan for business customers. The normal channel of the local bank was shut down, but all approved by stringent conditions and difficult underwriting standards. In addition, many companies and entrepreneurs have to suffer through a negative credit rating because of the economic situation.
For these entrepreneurs, there are few options outside of borrowing from friends and family, taking out equity loans on their house or accept the offer of a merchant in advance of their pay with credit card processing company.
These unregulated “advances” are not true business loans. Legally they are considered “cash advances” which means that the cash advance provider can charge any interest rate they desire. They can also change these rates at any time during the repayment period on the loans. It is not uncommon for cash advances to businesses to have effective interest rates above 50%.
Additionally, many merchant cash advance providers will charge hefty upfront fees as a condition of receiving the money. They also will require merchants to switch payment processing providers or purchase new swipe equipment as an additional requirement. While often advertised as “unsecured” and “not based on credit”, it is important to realized that merchant cash advances are not secured on the business owners credit, but they do often file a UCC (uniform commercial code) lien against the business.
This means that if the business is ever sold, the cash advance company has a legal claim to the proceeds of the business before the owner receives their money.
However, there is now a better way for a business to get working capital quickly, even if their business credit is less than perfect. This new type of business loan is called credit card receivable financing or CCRF and is characterized by:
- Interest/Factor rates that are 50-80% LOWER than a merchant cash advance on average
- No need to switch credit card processors – stay with existing processor
- No need to buy any additional equipment
- No upfront fees
- Owner credit down to a 550 score
- Maximum loan to $500,000
- A regulated business loan that builds true business credit is subject to state laws regarding maximum interest rate.
- Approvals in 48 hours: Fundings in 7 days.
In today’s difficult business environment it is time that businesses finally have a cost effective way get a loan for business. To find out more about this new, lower cost business loan.
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.
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