Finance & Lending

 

09 09 2014

09 09 2014

Alternatives to Traditional Loans Could Help Struggling Small Businesses

There have been conflicting reports as of late regarding small business loans.

For instance, Experian and Moody’s Analytics recently released their Small Business Credit Index report, stating that conditions improved during the second quarter of the year.

“[The index] gained 2.4 points to hit 112.2 from a revised 109.8 (previously 110.5) in the first quarter,” the organization’s said. “The index measures credit quality for firms with fewer than 100 workers, and last quarter’s move puts it at an all-time high.”

In short, it looks like small business borrowing activity is making healthy strides. However, a separate report tells a different story.

The latest edition of the Small Business Credit Survey released by the Federal Reserve Bank of New York, which highlights businesses in New York, New Jersey, Connecticut and Pennsylvania, shows that while loans for $1 million or more are on the rise, credit applications for amounts below this are stuck at 2005 levels.

Cost is obviously an issue contributing to this, as 40 percent of companies stated they encountered increasing financing costs. And it’s smaller businesses who are being hurt, of the companies seeking credit in the survey, 81 percent were looking for $500,000 or less.

Most damning of all may be that lack of credit availability was cited as the second-biggest challenge for businesses during the previous year, very narrowly beaten out by difficulty attracting customers.

“Banks tend to make it easier for larger companies to get credit, and often smaller companies don’t have the track record or time to spend to apply for credit,” Matthew Carey, director of the Center for Financial Market Studies at Iona College, recently told the Fairfield County Business Journal.

Carey went on to say businesses need to understand the difference between access to credit and traditional bank loans.

“When people talk about credit nowadays, it’s important to talk about these new alternative sources of funding as well,” he said.

Utilizing the alternative

One alternative option small businesses may want to explore is a business cash advance. Unlike traditional financing options that include complicated approval processes, long waiting periods and high interest rates, a cash advance could provide businesses with the money they need immediately.

Even better is that options exist where the advance is only repaid by future credit card sales through an automated process that retrieves a small fixed percentage of a business’s daily transactions.

In this way, businesses don’t have to repay the advance until they get paid.

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Any applications submitted electronically shall have the same force and effect as if the application bore an inked original signature(s). The above information, together with any accompanying financial statements, schedules, or other materials, is submitted for the purpose of obtaining credit and is warranted to be true, correct, and complete.

 

US Patriot Act:

To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each person and business that seeks a business loan. What this means for you: When you apply for a loan, we will ask for your business name, address, and Tax Identification Number. We will also ask for your name, address, date of birth, and other information that will allow us to identify you. We may also ask to see your driver’s license or other identifying documents.

 

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The Merchant and Owner(s)/Officer(s) identified in the application (individually, an “Applicant”) each represents, acknowledges and agrees that (1) all information and documents provided to National Funding, Inc. (“NF”) including credit card processor statements are true, accurate and complete, (2) Applicant will immediately notify NF of any change in such information or financial condition, (3) Applicant authorizes NF to disclose all information and documents that NF may obtain including credit reports to other persons or entities (collectively, “Assignees”) that may be involved with or acquire commercial loans having daily repayment features and/or Merchant Cash Advance transactions, including without limitation the application therefor (collectively, “Transactions”) and each Assignee is authorized to use such information and documents, and share such information and documents with other Assignees, in connection with potential Transactions, (4) each Assignee will rely upon the accuracy and completeness of such information and documents, (5) NF, Assignees, and each of their representatives, successors, assigns and designees (collectively, “Recipients”) are authorized to request and receive any investigative reports, credit reports, statements from creditors or financial institutions, verification of information, or any other information that a Recipient deems necessary, (6) Applicant waives and releases any claims against Recipients and any information-providers arising from any act or omission relating to the requesting, receiving or release of information, and (7) each Owner/Officer represents that he or she is authorized to sign this form on behalf of Merchant.(8) I consent to receive direct mail, faxes, text-messages, and e-mails sent by National Funding and its affiliates for the purposes of transmitting account updates, requests for information and notices, and (9) this request is for business and not for consumer purposes.

 

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I hereby certify: (1) the information provided is true and correct, (2) you are hereby authorized to investigate all bank, credit, and trade references, and said references are hereby authorized to release any requested information to you or your nominee, (3) such authorization shall extend to obtaining personal credit profile in considering this application and subsequently for the purposes of update, renewal or extension of such credit or additional credit and for reviewing or collecting the resulting account, (4) this information may be transmitted by us to you and by you to underwriter(s) for the purpose of granting me credit, either electronically or manually, and that by submitting this application, I take full responsibility for transmission thereof, (5) I am over 18 years of age, (6) I acknowledge my rights under the Fair Credit Reporting Act, (7) I consent to receive direct mail, faxes, text-messages, and e-mails sent by National Funding and its affiliates for the purposes of transmitting account updates, requests for information and notices, and (8) this request is for business and not for consumer purposes.

 

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