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06 12 2015

Bankless Times

06 12 2015

National Funding CEO Warns Against Complacency in Improved Economy

A small business funding expert is cautioning small business borrowers to remain just as diligent in assessing the different credit options available in the improving economic climate.

David Gilbert is the CEO of National Funding, a small business funder that began with equipment leasing in 1999 before growing to offer merchant cash advances, small business loans and merchant services such as credit and debit card processing and gift cards.

Mr. Gilbert said with unemployment and delinquencies low and all major confidence indexes high, he is confident lending in this economic climate. The positive number confirm the first quarter GDP dip was a blip, and forecasters agree, as they predict 2.5 percent GDP growth for the remainder of the year.

The growing confidence means more small businesses will be looking to borrow, but Mr. Gilbert says they need to be careful because the most popular options come with their own unique good and bad points.

Some business owners look first to their credit cards, but they have to be careful. They should only be employed for short-term needs and the business has to be diligent about paying off the balance each month.

They should note that credit utilization rate accounts for roughly 30 percent of one’s credit score and frequently maxing out credit cards can skew the credit utilization rate and hurt a credit score. Many traditional lenders negatively view a high utilization rate, meaning it can impact future borrowing.

Credit cards also offer several useful benefits for small businesses, Mr. Gilbert said.

“Most credit cards offer cash back and rewards, which many people use to buy business supplies.”

Some also provide useful financial management tools that allow the small business owner to track spending by area and to monitor employee spending patterns. Many allow you to upload spending data directly into financial management software, he added.

Some businesses, especially those with irregular revenue flow patterns, may need to take out a working capital loan, which is often used to address accounts payable or wage shortfalls.

“Working capital loans are best employed for short purposeful uses or a one-off bigger expense where the owner knows they will be able to pay it off in a short period of time,” Mr. Gilbert said.

Working capital loans often come with quick turnaround times, which only makes sense given their best-intended purpose is to meet a temporary shortfall or to meet a surprise expense.

Mr. Gilbert advises against using working capital loans for expenses taking longer than a year to pay back. Using the example of an equipment purchase, he said a three to five-year lease makes better sense

When meeting with a prospective borrower, Mr. Gilbert said he discusses the purpose for borrowing so he can match the borrower with the best product. Looking at a borrower’s financial history can help determine if they are overly ambitious and how long it will take to pay off the balance. This often happens with companies purchasing too much inventory in order to get a discount, he said.

Small Business Administration loans are good for longer term obligations and come with good pricing because they are government-backed, Mr. Gilbert said. They are often attached to real estate, which is fine as long as you own your own building, he said.

There are some negatives, Mr. Gilbert said.

“SBA loans come with extensive paperwork, and many small businesses may not have all the required information.”

They are best employed as part of a longer term development because they can take as long as six months to approve. So do not apply for one when a pipe bursts.

 

– By Tony Zerucha for Bankless Times

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Terms & Conditions

General Acceptance

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.

 

For Loan/Merchant Services:

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, 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.

 

For Equipment Services:

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, 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.

The Federal Equal Credit Opportunity Act prohibits creditors from discriminating against credit applicants on the basis of race, color, religion, national origin, sex, marital status or age (provided the applicant has the capacity to enter into the binding contract); because all or part of the applicant’s income derives from any public assistance program; or because the applicant has in good faith exercised any right under the Consumer Credit Protection Act. If for any reason your application for business credit is denied, you have the right to a written statement of the specific reasons for the denial. To obtain the statement, please write to National Funding Inc., 9820 Towne Centre Drive, San Diego, California 92121.  Funding amount and credit approval is subject to a full credit profile review.