David Kirkpatrick

March 11, 2010

Merchant cash advance, a small business capital option

Filed under: Business — Tags: , , , , , — David Kirkpatrick @ 10:48 am

There’s a serious credit crunch out there right now, as anyone in business — particularly small- to mid-sized business — knows. Remember all that TARP bank bailout money from fall 2008? The biggest recipients of federal dollars continue to cut lending to small companies and seven of the top 11 TARP banks cut their small business loan balances every reporting month from the time they received taxpayers dollars through the end of 2009. Small Business Administration-backed loans are taking up some of the slack, but where else can a small company turn when looking for loans for business or just extra operating capital?

Merchant cash advance

One option is the merchant cash advance market. This industry has existed for around a decade and has really ramped up during these tough economic times coupled with an extremely tight credit industry. Merchant cash advance providers give businesses a lump sum of immediate cash in exchange for a percentage of future sales or future credit receivables. A disadvantage of a merchant cash advance is the equivalent interest rate can be pretty high when compared to a more traditional business bank loan or line of credit, but this capitalization option does offer some advantages over working through a bank.

The upside

The key upside is it’s available, and right now a bank loan in this credit market just might not be an option. Other advantages include a relatively quick approval process, bad credit won’t prevent you from obtaining a merchant cash advance and the only collateral you really need is strong credit card sales.

If you decide to pursue a merchant cash advance remember to consider the money you’re advanced as a loan to be repaid, not as just some extra cash going into the business account. Merchant cash advances aren’t the best way to capitalize your business, but they serve a very necessary function for businesses looking for, or needing, liquidity in a tight credit economy.

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February 3, 2010

Recycling TARP funds for small business loans

Filed under: Business, Politics — Tags: , , , , , — David Kirkpatrick @ 5:51 pm

As much as I think the deficit is a significant issue, the ongoing credit crunch for small business is a much more pressing issue for the economy. Recycling money that bailed out Wall Street to give Main Street a leg up is probably good politics, but more importantly, it is good policy.

From the link:

President Obama called on Congress Tuesday to recycle $30 billion of the remaining Troubled Asset Relief Program (TARP) funds into a new government lending program offering super-cheap capital to community banks that boost their small business lending this year.

Touted last week in Obama’s State of the Union address, the plan is the latest incarnation of a proposal the president first floated in October. While credit conditions for large businesses have improved over the past year, small companies are still widely reporting problems finding the capital they need to fund their operations.

December 7, 2009

The small business credit crunch and unemployment

Filed under: Business, Politics — Tags: , , , , , — David Kirkpatrick @ 5:41 pm

These two elements — little to no credit for small business and a difficult rebound from deep unemployment — are integrally tied together. Small business jobs are the backbone of the U.S. economy, and small businesses need revolving credit to help ensure cash flow. When your accounts receivable go from averaging 20 days to averaging 45 days, ongoing business expenses become an issue.

I know several small businesses that are currently in a state where invoices are getting paid late so in consequence the companies pay late and the entire cycle helps no one. With banks not providing credit to worthy small businesses the entire system is being ground down by a lack of liquidity.

This example is almost beyond belief and perfectly illustrates where the banking industry — both local and national — is doing real damage to the economy’s small business backbone.

From the link:

Veteran Chicago restaurateur Ivan Matsunaga needs a $300,000 loan to finance a renovation of his flagship pizza restaurant into a higher-end eatery. The revamp is required for his lease renewal, but it will also create job opportunities: Matsunaga estimates that he’ll need five additional staffers to run the updated restaurant.

Three banks turned down his loan request — including a community bank Matsunaga personally invested in at its launch three years ago.

“How perplexing is it that they would not reciprocate? What type of banking environment exists where they currently have $100,000 of my money and yet they won’t give me a loan?,” Matsunaga asked at the hearing. “If my bank were to approve my loan today, I, for one, would create jobs immediately.”

Big banks have shaved more than $10 billion from their small business lending totals over the past six months, which drew sharp criticism from Senators at Wednesday’s hearing. “I know that my situation is not unique,” Matsunaga said. “I have had numerous discussions with my peers who are frustrated by these same issues.”

November 27, 2009

That SBA stimulus cash loan program? Gone

Well, more correctly out of money.

From the link:

The stimulus cash that helped boost small business lending this year just ran out.

The Small Business Administration said Monday that it has run through all of the $375 million Congress allocated to temporarily waive fees and boost guarantees on loans backed by the SBA’s lending programs. Businesses still hoping for a slice of the pie can get in line, cross their fingers and wait.

June 18, 2009

SBA’s America’s Recovery Capital loans

This Small Business Administration program looks like a boon for Main Street (remember way back when small to mid-sized business was called “Main Street?” Oh yeah, that was just a few months ago … ) as long as banks decide to play nice.

I understand banking’s fear of becoming over leveraged, and the pressures being put on banks by regulators to keep adequate cash reserves. At the same time the stimulus money was injected into the market to, you know, stimulate. Cash on bank balance sheets is stimulating nothing other than possibly some bank managers’ pants.

The program is there, the cash is there so here’s some advice to the banking world — get with it and start stimulating.

From the link:

Struggling small business owners can begin applying next week for an interest-free debt-relief loan through a new Small Business Administration program — if, that is, they can find a bank to process their application.The new “America’s Recovery Capital” (ARC) loan program, authorized by February’s stimulus bill and slated to launch on June 15 after four months of planning, aims to make small, government-backed loans available to viable companies laid low by the recession. (For full details on ARC eligibility and loan terms, click here.) But the loans will be made and managed by SBA lenders, and so far, few have jumped on board.

Before the details of the program were released on Monday, lenders were hesitant to commit, concerned that there wasn’t enough economic incentive for them. Now, with key details about how the program will work finally available from the SBA, many haven’t retreated from their initial wariness.

“While we have received a few requests from our customers, we are still leaning against it,” says John Handmaker, president of Quadrant Financial, a small business lender based in Louisville. “The guidance from the SBA indicated rates and terms, which have provided some clarity, but we’re not 100% certain about what we need to be careful of. We don’t feel we have a solid grasp of the standard operating procedures and rules, and we’re not going to jump in until we really understand it.”

February 2, 2009

Tips for small businesses and banking

Filed under: Business — Tags: , , , — David Kirkpatrick @ 5:13 pm

This is an informative article for small business owners and how to develop a solid relationship with a bank. If you fall under this category I highly recommend hitting this link for the entire piece.

From the link:

Q.What is your top piece of advice for small-business owners who are worried about their ability to continue financing their company in this credit environment?

A. You may have a great relationship with your bank, but you should always have a backup relationship. That is really critical in today’s environment. You should visit a number of financial institutions and get a feel for which ones are seeking business like yours. Many banks offer small-business loans, but they don’t specialize in them. And some banks only specialize in small-business loans to certain industries. So ask the bankers if they would be open to extending credit to your business, and if so, under what terms. You may find that the loan window is open for you, and you may find that it’s not.