Always Have a Plan B — plan Bush
The Working Capital Journal
The Working Capital Journal (also referred to as The Working Capital Guide) is a business finance resource published by Stephen Bush and AEX Commercial Financing Group.
The consistent goal of this AEX publication is to provide small business owners with a concise source of data, advice and strategies that apply to the current difficult commercial funding environment for small business loans and commercial real estate financing. The Working Capital Journal provides a comprehensive discussion about a number of commercial finance topics likely to be of special interest for most small businesses — these issues include:
- Firing your commercial banker and finding new sources for working capital loans.
- Growing problems with SBA loans and SBA loan refinancing.
- The increasing value of business finance consulting.
- Avoiding problems with credit card processing and business cash advance programs.
Small Business Financing and Working Capital Questions
Many working capital financing problems and questions involve business cash advances (also referred to as credit card factoring, merchant cash advances and credit card financing) because it is a practical option for small businesses to obtain working capital. Please do not hesitate to contact us directly about additional information or questions.
Why Has Availability of Working Capital for Small Businesses Changed So Much During the Past Several Years?
Here are three of the key factors behind the rapidly changing funding environment for small businesses:
- First, small business unsecured lines of credit have all but disappeared.
- Second, many banks are exiting business lending.
- Third, most banks are increasingly requiring more collateral for commercial loans.
Traditional working capital financing is currently available from a shrinking group of commercial lenders. Small business owners should determine which commercial banks are still actually providing this specialized commercial finance funding. In most cases the active commercial lenders for this specialized form of commercial funding are limiting working capital loans to businesses that are current in their debt payments and are showing a net profit (based on recent financial statements). For businesses not qualified for commercial financing using these two stringent requirements, there are alternative funding sources such as business cash advance programs.
Most businesses need to prepare for life without relying on a traditional bank line of credit and instead consider other viable sources of commercial financing such as business cash advances (that provide working capital based upon future credit card processing activity). Business owners should be willing to seek out commercial finance funding sources beyond their previous banking relationships when they encounter difficulties obtaining working capital loans and commercial loans from normally dependable lenders.
What Are the Primary Reasons for Obtaining Working Capital with a Merchant Cash Advance?
I consider these to be the five primary reasons that a small business owner should evaluate business cash advance programs:
- A business cash advance based on credit card financing is one of the few viable options for reliably obtaining short-term working capital.
- Credit card factoring is available to most businesses that accept credit cards in their business transactions.
- There is no need for collateral.
- There should not be any up-front loan fees or closing costs.
- Funds can be obtained quickly.
What Are the Problems to Avoid with Credit Card Processing and Credit Card Factoring?
There are at least 10 key problems to be avoided with some business credit card financing programs:
- Maximum merchant cash advance of $10,000 to $50,000
- Up-front loan fees
- Collateral required
- Closing costs
- 2-3 years or more in business required to qualify
- Financial statements required regardless of business cash advance amount (Note: larger cash advances can involve additional information such as financials)
- Fixed payments to pay off the business cash advance
- Fixed term to pay off the working capital financing
- 12 to 24 months of $10,000 to $25,000 (or more) in credit card sales required
- High credit scores (frequently 680 to 700) required to qualify
What Are the Criteria for Merchant Cash Advances up to $300,000?
- One year as service or retail business
- Business accepts credit cards as a form of payment
- Ability to document credit card sales of $5000 or more per month for the last six months
- Acceptable personal and business credit (minimum personal credit scores of 500)
- No open tax liens, judgments or bankruptcies
- If leasing: in good standing with landlord and at least one year remaining on lease
What Does a Preferred Business Cash Advance Program Look Like?
It is not necessary to accept ANY of the 10 problems listed above in order to obtain working capital based on future credit card sales and business cash advances. You can eliminate ALL of these potential problems. Here is an overview of a recommended commercial finance program:
- Business cash advances from $5000 to $300,000 (higher amounts also possible on a case-by-case basis)
- No up-front loan fees or closing costs
- No financials required for most situations although larger business cash advances will sometimes require additional information such as financials
- No set term to pay off the business cash advance although there is a minimum of 90 days
- No collateral required
- No fixed payments - a small percentage of each credit card sale is collected from one of the processing banks as goods and services are purchased
What If Your Bank Says No?
Yes or No? Which word are you likely to hear most often when talking about your business funding needs with your banker? If your bank always says “Yes” to your commercial financing requests, congratulations! But we need to talk if you think that your banker prefers two-letter words like “No.”
AEX likes the sound of the word “Yes.” If that doesn’t seem like your banker, you are probably already wondering how you are going to take your company to the next level. Unfortunately, that is a common concern among business owners like you. The good news is that banks are not the only solution for your financial needs. The bad news is that your banker isn’t about to tell you that.
Some Banks Are the Problem and Not the Solution
Along with technology and the rest of society, the banking world has changed dramatically during the past three decades. For example, there are now “Zombie Banks” that have a negative net worth. How far do you think you will get if you are talking to a banking institution that has more liabilities than assets?
In addition to changes at these cash-poor banks, an increasing number of profitable banks have changed their lending practices. If you want to see just how much things have changed at your commercial bank, ask your banker how easy it is get commercial property financing for your next project. If they are being honest, you should expect to hear the words “maybe” and “maybe not” — or perhaps the dreaded “show me your business plan.” But “Yes” is a word that has become increasingly extinct in many banking circles.
Should You Fire Your Bank?
The short answer: not until you talk to us.
The long answer: In a surprising number of cases, we have successfully changed a banker’s initial “No” to “Yes” on behalf of our clients. While you might not like negotiating, it is one of our strengths. We do this every single day, and we know how to communicate and negotiate with bankers.
However, “No” from a bank is never the end of the story for us. We will help you to work with the “best business lender” — for many of our clients, this means using a non-bank lender. Do you really need to work with a bank that keeps saying ”No?”
Access to Non-bank Lenders
AEX Commercial Financing Group stopped relying on banks a long time ago, and we have never looked back. If your bank is stuck on “No” and “Maybe,” then you owe it to yourself to look into how to keep your business moving forward. We understand the new world of business loans and commercial mortgage financing.
Effective use of non-bank lending is the financial key to success for most of our clients. We fully understand that “Yes” is the only word to define business success when you are trying to make your business projects more profitable.
Would you like to hear how AEX can get your business past “No” and on the road to “Yes?”
The best way for you to get started is by calling or emailing Steve Bush. Are you ready to take your business to the next level?
Just say “Yes.”
Copyright © 2014, Stephen Bush. All rights reserved. AEX Commercial Financing Group
