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Guaranteed merchant cash advance is now a reality.
Merchant cash advance is a form of receivable financing. It is not a loan! In fact due to the cost of the money if it were a loan the only state it would be legal is Nevada. The way it works is that a merchant takes an amount of money and agrees to pay back a set amount, the amount the merchant pays back ranges from 1.33 to 1.49 or for every $1000 you will pay back between $1330 and $1490. Payments are made through “split batching” a process that takes a portion of each days credit card purchases to pay off the set amount owed. The obvious benefit of this type of system is no monthly bills and in fact this is not a credit liability and is not counted in the income to debt ratio.
First Merchant Funding has pioneered a new program to fund those businesses whose owners cant even qualify for the relaxed underwriting requirements of regular merchant cash advances. With this new program only the merchants monthly statements are used to determine eligibility. The amounts available are not aggressive at first but after completing a cash advance successfully that merchant is offered more money on subsequent advances.
Merchant cash advances are not new; this type of funding source has been around for many years. While these funds are expensive they have several advantages over conventional loans. In general lenders want to see the Five “Cs” 1.) Capacity to repay, 2.) Character, 3.) Good Loan Condition, 4.) Capital in his/her business, and 5.) Collateral. It is not unusual for banks to require additional security for new businesses or business owners with less than perfect credit, and not unheard of to put a second mortgage on the family home to offset the risk to the lender. Merchant cash advances are completely unsecured; however, you do sign a personal guarantee. Historically this money has been very attractive to the restaurant industry. The First merchant program is exceptional in that it removes any barrier a business may have to these unsecured funds. Please do not think in terms of the traditional business loan, since the underwriting requirements are almost completely different and not present in the merchant cash advance.
Banks will always look at your past activities and current credit in determining your eligibility for a loan, First merchant funding provider focuses on your past, present, and future credit card transactions. The target market for these loans are usually business owners whose credit score is less than perfect. Thats why Im so excited to be writing this since a bad credit score is not a deciding factor in qualifying you. This is the main difference between this product and a traditional business loan. Furthermore, Merchant cash advance dose not require extensive documentation and oftentimes all you need is 4 months worth of statements, a completed application, and the phone numbers to your landlord.
Thus, you will find it much easier and faster to get a merchant cash advance than a bank loan, usually 24 to 48 hours compared to what could be months with a bank. Pre-approval are obtained within 1 hour. For most business owners, the approval rate of a business loan is very low even with SBA guarantees especially if you don t have excellent credit.
504: the SBAs Shining Star (Page 1 of 2)
The U.S. Small Business Ad-ministrations (SBA) loan programs have garnered much criticism over the years. Some complaints may have been warranted in the past, but these days, the SBA is different.
Increased accountability and newly implemented efficiencies are a terrific development for U.S. taxpayers and for Americas small-business owners. As we see these changes, I think industry members should work to remove the stigma that exists about certain SBA loans.
Many entrepreneurs and far too many brokers, ironically dismiss the SBA because of its more well-known 7(a) lending program. This program is most often in the news and nearly always seems to be in crisis or in need of supplemental appropriations. Whether or not the 7(a)s reputation is deserved, its negative attention has managed to tarnish other effective and lesser-known SBA programs. But 7(a)s parameters do not apply to all SBA programs, despite some brokers thinking otherwise.
In my opinion, the SBA deserves its budget more than $22 billion because of one program: the SBA 504 loan program. It is for small-business owners who want to acquire or construct their own facilities. Despite fallacies surrounding it and the SBA, this little-used program can be an important tool.
The 504 program provides small-business owners with 90 percent loan-to-cost financing for most commercial real estate projects. These loans are structured with a conventional mortgage for 50 percent of the total project cost, combined with a government-guaranteed bond for 40 percent. The remaining 10 percent is the borrowers equity and is usually half as much as traditional lenders require. This lowers the risk for small-business owners as opposed to lowering the lenders risk profile with more capital injected into the real estate.
These loans are meant to finance total project costs. The first mortgage is typically a fully amortizing 25-year term at market rates, while the second mortgage is a 20-year term but with the interest rate fixed for the entire term at below-market rates. For small-business owners, these loans and terms can provide the highest cash-on-cash return available in the commercial-mortgage industry. Still, myths about it exist.
Myth No. 1: SBA loans take too long The SBA is aware of small-business owners time and of how busy they are. Its certified development companies (the SBAs representatives on these loans) now move quickly. They often can examine borrowers underwriting documents in only 48 hours. Once lenders scan their borrowers documents, they can actually drag and drop them onto some of the certified development companys or SBAs secure servers. This technological innovation saves the time of doing overnight mail and is a huge improvement in the slow-adapting commercial-mortgage industry. If an SBA loans approval process takes more time than this, it may be that a particular lender is holding it up.
Myth No. 2: SBA loans have too much paperwork There have been great efforts to streamline the overall application process. In some cases, they can nearly match the paperwork of what any ordinary 80 percent loan-to-value conventional commercial lender would need to approve a loan. Some borrowers find this paperwork is far less than what they had to complete when they refinanced their home loan. Specialized commercial lenders have helped this along, too.